India is a complex and chaotic place with hundreds of millions of poor citizens and a ramshackle infrastructure—particularly when compared to the gleaming new ports, highways, and airports that China has built in recent decades. Moreover, India has long been plagued by a notoriously inefficient, albeit democratic, government. But these challenges and barriers have arguably produced something remarkable in India—a problem-solving mentality that helps many Indians to quickly, cheaply, and cleverly invent new products and new ways of doing things.
Indeed, this mentality has caused multinationals the world over to flock to India, not just for backroom outsourcing but to tap some of the most innovative minds in the world. As a result, optimists are saying that India today is booming in many respects, with a variety of world-class firms such as Tata Motors and mobile phone provider Bharti Airtel. Not surprisingly, they predict that India’s gross domestic product growth will pass China’s in a few years. And by 2015, some estimate that another 460 million Indians will join the ranks of the middle class, bringing spending power with them. Small wonder that some predict that India, not China, will be the fastest growing big country in the world for the next quarter century.
Interestingly, while China’s approach to growth has been, for the most part, government driven, India’s successes are more connected to the collective efforts of its nearly 50 million entrepreneurs. The unleashing of India’s underlying entrepreneurial culture has been driven by several factors, including reforms that started 20 years ago (e.g., lower tariffs, friendlier rules for investment, and less business red tape). Another factor is the domestic market. While many Indian companies do a brisk export business in services, the local market is large and demanding, with customers wanting cheap products that work well from the start. And India’s frugal innovators provide them what they want. In fact, some of what they have come up with is nothing short of mind-boggling. For instance, Tata Chemicals has developed a water filter that costs less than $1, needs no power, and provides 30 days of pure drinking water for a five-person family. And Indian scientists have developed a new laptop they hope to bring to market—one that costs just $35!
All of this is consistent with recent research about cultural values that seems to encourage entrepreneurship. Entrepreneurs function in a social context, and consequently societal culture can play a role in inhibiting or enhancing the entrepreneurial problem solving seen in India today. Specifically, cultural values that encourage helpfulness, cooperation, relationship building, and bootstrapping—particularly as mechanisms for overcoming obstacles in society—seem to help spur entrepreneurial innovation. And India generally scores high on these attributes—on what GLOBE refers to as humane orientation. Likewise, India scores highly on in-group collectivism, where strong family connections and ties dominate and define India’s most prominent and entrepreneurial companies. Moreover, when entrepreneurship is touted as being socially desirable in a country, it can, over time, strengthen and support cultural values that encourage entrepreneurial activity.
But, as stated earlier, India is a complex place with plenty of built-in contradictions. Because of bureaucratic barriers and increasing domestic competition, some of India’s best companies, such as Godrej Consumer Products, are looking abroad to places such as Africa to grow their revenues—where their efficient and inexpensive business models are well suited to create products tailored to local demands. Indeed, many companies feel that India remains a very challenging place to do business. Many Indian roads are abysmal, and some are slowed by checkpoints where officials demand bribes from truck drivers. Likewise, companies often must maintain their own backup power and sanitation systems given the lack of stable utilities. Moreover, while India has plenty of innovative entrepreneurs, it is woefully short on engineers and other trained professionals, has too few outstanding universities, and a weak primary education system. The government is also somewhat unpredictable, and laws are routinely challenged in court, making it difficult for businesses to know what will happen next. One Western businessman noted that China was much easier to operate in compared to “the freewheeling chaos of India.”
The big question, of course, is whether India’s cultural support for its unique, problem-solving frugal innovators can continue to lift the country up faster and farther than its challenges and weaknesses hold it back. Will the optimists or the pessimists be right in the end about India? What do you think?51
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