Reverse Innovation in Emerging Markets

Abstract

The locus of innovation in the global economy appears to be changing because of the rise of emerging economies, such as China and India, and the “flattening” of the world. Poor emerging markets no longer just borrow innovations from developed countries; from time to time they also contribute innovations to the rest of the world, including developed countries.2 We refer to this as reverse innovation, that is, the case where an innovation is adopted first in a poor country before being adopted in rich ones. Instances of reverse innovation still appear to be rare, and it is hard to tell if this will change materially in the future. Therefore, this chapter is about a nascent phenomenon whose future potential is uncertain. Nevertheless, reverse innovation is a promising area for research by international business and strategy scholars because it provides the opportunity to enrich and extend mainstream theories in a number of areas. At the same time it raises the level of awareness necessary for governments trying to foster innovation, the role facilitating institutions might play (NGOs, R&D labs around the world), and finally the potential benefits that multinational companies might gain to sustain a competitive advantage.