Fulbright-Funded Research Reveals Barriers to Innovation

Vadake Narayanan, PhD, Drexel LeBow’s Stubbs Professor of Management, recently returned from a Fulbright-funded research trip to India, where he studied five academically-affiliated business incubators that are home to both regular startups as well as social-impact innovation (companies that focus on making a positive impact as well as turning a profit).

Narayanan stayed in Ahmedabad, where he collaborated with faculty members at the Indian Institute of Management. He also collaborated with faculty at the Institute’s Bangalore location. All told, he interviewed more than 50 incubator managers, entrepreneurs and government officials to broaden his research on innovation in emerging economies.

He is still working on a paper that will detail his findings, but he shares some observations and what he sees as tentative implications.

The positive side of incubation in India, Narayanan says, is in the social impact space. “The social entrepreneurs I met are doing things that are really novel and out-of-the-box. I would even go as far as to say that with regard to social incubation, these startups are far ahead of the game compared to incubators I find in the U.S.,” Narayanan says.

One professor he met with teaches a class requiring students to go out into rural areas to find out what’s really needed to help improve those economies. Students create an assessment and provide a solution. Successful social startups have come out of that class.

“Comparatively, the private businesses I met with incubating in India have a lot of catching up to do,” Narayanan says. “They are in the early stages of the learning curve.”

He says the issue isn’t lack of knowledge about how to create and run an incubator. “I gathered that the entrepreneurs I spoke to have literally mined the books and textbooks on incubation and best practices from the U.S. and Europe. But, the barrier that exists is the need to take action to overcome cultural influences.” One well-known faculty member who teaches entrepreneurship and is considered the “granddaddy” of entrepreneurship in India, provided Narayanan with an example. A student once came to him wanting to take his entrepreneurship class, but asked the professor if he would speak to his father first. In a nutshell, the father’s concern was: “My son wants to build a firm. But, he will have a lot of debt by the time he graduates and won’t make money right away while he is starting up a company, so it will be hard to marry him off.”

In general, this attitude is in line with a cultural tendency toward aversion to risk in India. Narayanan says that typically members of the middle class in India believe that a steady job with a company like IBM is the prized outcome of a graduate education.

When he looks at the incubation process, Narayanan says it is clear that the role played by culture is slowing innovation in India. “Incubators in India have to take action to overcome cultural barriers and inertia. That’s the major eye-popping discovery that I had.”

Narayanan says institutional, financial and technical barriers also exist. There’s a lot of red tape involved in abiding by government regulations in India. He gives a hypothetical example: “Let’s say you want to export something with a biological component to Germany from India. You have to get clearance from a customs office. It will be a time consuming and complicated process to get through the regulatory machinery in a country with an emerging economy.”

Financial engines for early stage investment are still in their infancy, and lack of depth in technological expertise is also a barrier. “For innovations that are highly technological in nature, finding financiers who understand it, engineers who can manufacture it and facilities capable of producing it can be very difficult.”

Incubators are attempting to help startups overcome all of these barriers – spending money on helping entrepreneurs reduce their debt levels and working to create ecosystems capable of funding, making and selling innovative products.

Incubators are also working to educate people and get them excited about entrepreneurship and what incubators do. And they are getting a little help from a relatively new government-funded campaign called “Start Up India,” which has arisen to promote financing for start-up ventures in order to boost entrepreneurship with the goal of creating jobs and growing the economy. Narayanan says they seem to be invoking a sense of “glamor” in entrepreneurial activity especially among the younger generation — which is likely to help erode those cultural barriers in the long run.

Overcoming learning curves are also important to the incubators themselves: they are relatively novel within emerging countries and first appeared in India only 15-20 years ago.
Editor’s Note:This is the third Fulbright Narayanan has been awarded. In 1997, he received the Fulbright-FLAD Chair in Management of Technology to research university internship programs at the University of Aveiro in Portugal. In 2004, he obtained the Fulbright Alumni grant to work with his colleague in Portugal, delivering a knowledge management course in a global classroom format. He is the former Associate Dean for Research at LeBow.