Published 14 May 2010

Innovation for a new world?

Emerging markets, frugal innovation and changing R&D

There is a global shift underway. China and India will soon have among the largest economies in the world, and by 2050 most predictions place them among the top three economies. The ascent of the Chinese and Indian economies is largely a demographic story; with large numbers of inhabitants in working age the absolute size of the economy grows. An important difference to the economic world-order as we know it today is that while these economies will be large, the per-capita income will remain low - in comparison to OECD countries. Mega markets with micro consumers will therefore be an important aspect of the future global economic landscape.

There is a global shift underway. China and India will soon have among the largest economies in the world, and by 2050 most predictions place them among the top three economies. The ascent of the Chinese and Indian economies is largely a demographic story; with large numbers of inhabitants in working age the absolute size of the economy grows. An important difference to the economic world-order as we know it today is that while these economies will be large, the per-capita income will remain low - in comparison to OECD countries. Mega markets with micro consumers will therefore be an important aspect of the future global economic landscape. 

With respect to innovations this means that returns to innovations for consumers with lower purchasing power will become increasingly more interesting. Frugal innovation is one of many terms that denotes innovative activities that seeks to develop products that consume less resources and that trade off some functionality for low cost. 

India is developing to a global center for frugal innovations and frugal engineering. This is most notable in the area of small and inexpensive automotives, but also in other fields such as medical and space technology. Most of the innovative activities are happening in the private sector, led both by Indian and multinational corporations alike. However, the Government of India is also seeking to systematically support this kind of innovation although currently there are few concrete programs.

From a Swedish perspective it is important to consider the possibilities of expanding the successful innovation system that is currently focused on high-technology for established markets to also enable Swedish innovation for emerging and new markets.

Title
Innovation for a new world? Emerging markets, frugal innovation and changing R&D

Serial number
WP/PM 2010:18

Reference number
2011/028

Download the reportPDF