Laggards, Leading Imitators or Leapfroggers: How Are Emerging Markets Innovating?

Abstract

Emerging market firms in high-technology industries have long been thought of as laggards. We argue that this paradigm needs to be reassessed. Using biotechnology as an example for a radical technology, we argue that emerging markets, compared to developed markets, are well positioned to pursue such technologies since they (1) have low path dependencies in traditional chemistry based therapies and choose to leapfrog older technologies and (2) have strong incentives to invest in imitative abilities in the radical technology. We examine drug development initiatives by both developed and emerging markets in 2000/2001 and 2010/2011. We find that emerging markets have become responsible for a substantial portion of new drug development initiatives worldwide. More importantly, these markets, much more than developed markets, have emphasized biotechnology for both imitative and innovative new therapies.