Innovative interaction good for economic growth
7 December 2006
New technologies only contribute to the economic growth of (developing) countries if they are widely used within the economy. The diffusion of technologies and innovation in economic sectors strongly depends, however, on the relationship between companies in the same industrial column, says Dutch-sponsored researcher Mamata Parhi. She investigated which mechanisms play a role in the implementation of automated production techniques in the Indian automobile industry.
How quickly Indian producers of automotive parts switch to automated production processes depends on whether the demand for the products from the vehicle sales branch increases, discovered Parhi during her analysis. A crucial aspect of this is the relationship between supplier (parts manufacturer) and buyer (vehicle maker), both literally and figuratively. The better the relationship is, the smaller the gap between companies and the greater the willingness to undertake various obligations such as investments in new technologies and innovation. Examples are automation of production processes and organisation, such as the use of computer-aided design in manufacturing and just-in-time delivery. Parhi's research confirmed that larger companies switch more quickly to advanced production techniques than medium-sized and small companies. Also the effort a company devoted to research and development, the quality of its employees and the technological level of a company affect the willingness to innovate says Parhi.
Demand-driven innovation
According to Parhi, the role of networks and the interaction between companies and their impact on the dissemination of new technologies has scarcely been investigated in developing countries. She thinks that such research is vital to discover the extent to which innovation can stimulate economic growth in these countries. In her view the extent to which technological advances are implemented across the economy is more important than the advances themselves. The Indian government's policy ought, therefore, to pay greater attention to the demand-driven innovation highlighted by Parhi. Accordingly the government should encourage cooperation between different types of companies and between knowledge producers and knowledge users.
Parhi thinks that both industry and policy efforts to integrate sectors such as IT with the automotive industry, is worthwhile. Just like the automobile industry, the IT sector has experienced a fantastic growth since the liberalisation of the Indian economy at the start of the 1990s. According to Parhi, however, the sector continues to be vulnerable due to its dependence on foreign demand. As the various advanced manufacturing techniques are computer-based and IT-software intensive, a greater effort to integrate the two would generate synergies for both the sectors. Comparative research in other emerging industrial nations such as China, Brazil, Mexico and South Africa could provide more insights into the contribution of technological advances to economic growth.
Parhi carried out her research at the UNU-MERIT Institute (a partnership between Maastricht University and the United Nations University) and was funded by NWO-WOTRO.
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For further information please contact:
- Mamata Parhi (Maastricht University)
- t :+31 43 350 6300, parhi@intech.unu.edu
- The doctoral thesis will be defended on 14 December 2006.
- Supervisor Prof. Bart Verspagen (Maaastricht University), associate supervisor Prof. S. Mani
