Innovation Strategy in Emerging Market Firms in Response to Institutional Transition under TRIPs: The Case of the Indian Pharmaceuticals Industry
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AbstractThis research aims to understand how institutional transition towards a tight intellectual property rights (IPRs) regime under TRIPs affects the innovation strategies of firms from emerging economies. Focusing on firms from the pharmaceutical industry in India, this study attempts to address this broad research question by two different methodologies. Firstly, two in-depth cases studies are conducted to explore how latecomer firms are building innovation capabilities in response to a shift towards a tight IPRs regime under TRIPs. A cross-case analysis is then performed to identify the new innovation oriented learning and linkage practices of the sample firms. Secondly, drawing on the key findings of this cross-case analyses and enfolding these with literature related to innovation and latecomer firms, a set of propositions is developed to understand how a shift from a weak to a tight IPRs regime is likely to affect the innovation strategy of emerging economy firms. These propositions are tested by a comparative analysis of innovation practices of firms over two time periods, corresponding to a weak and tight IPRs regime, using ANOVA and discriminant analysis. The findings reveal that a shift to a tighter appropriability regime triggers latecomer firms to adapt both their innovation related learning and linkage practices. A tighter appropriability regime increases the propensity of firms for both exploratory and exploitative learning, developing their human capital base and expanding their codified knowledge base whilst increasing their propensity for building both formal and informal foreign linkages as well as formal linkages with local institutions. This study makes an important and new contribution towards building theory on how emerging economy firms adapt innovation strategies in response to institutional transition towards a tighter appropriability regime and its findings also have important implications for business practitioners and policy makers.
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