Inovation entrepreneurship and the economy in the US china and india shah

Innovation, Entrepreneurship, and the Economy in the US, China, and India Innovation, Entrepreneurship, and the Economy in the US, China, and India Historical Perspectives and Future Trends Rajiv Shah Zhijie Gao Harini Mittal AMSTERDAM • BOSTON • HEIDELBERG • LONDON NEW YORK • OXFORD • PARIS • SAN DIEGO SAN FRANCISCO • SINGAPORE • SYDNEY • TOKYO Academic Press is an imprint of Elsevier Dedication To the memory of my parents for all the sacrifices they made To my wife, Shrida, and to my sons, Rishi and Yash, for their affection, love, and support; To all my family and to all my close friends especially those in the Dallas area who have been my extended family and support system through the roughly thirty-five years of my life in this area and, To all my teachers and mentors, too numerous to list, for all that they have taught me Rajiv R Shah To my parents, My husband, my brother, and my friends, Who give me endless love, consideration, help, confidence, and courage to face difficulties Zhijie Gao To my sons Prashant and Krishna for their undying love and inspiration; To my parents O.P Seshadri and Menaka for their constant encouragement, support, and affection; and To my sister Anuradha for believing in me always against all odds Harini Mittal Academic Press is an imprint of Elsevier 32 Jamestown Road, London NW1 7BY, UK 525 B Street, Suite 1800, San Diego, CA 92101-4495, USA 225 Wyman Street, Waltham, MA 02451, USA The Boulevard, Langford Lane, Kidlington, Oxford OX5 1GB, UK First published 2015 Copyright © 2015 Elsevier Inc All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher Details on how to seek permission, further information about the Publisher’s permissions policies and our arrangements with organizations such as the Copyright Clearance Center and the Copyright Licensing Agency, can be found at our website: www.elsevier.com/permissions This book and the individual contributions contained in it are protected under copyright by the Publisher (other than as may be noted herein) Notices Knowledge and best practice in this field are constantly changing As new research and experience broaden our understanding, changes in research methods, professional practices, or medical treatment may become necessary Practitioners and researchers must always rely on their own experience and knowledge in evaluating and using any information, methods, compounds, or experiments described herein In using such information or methods they should be mindful of their own safety and the safety of others, including parties for whom they have a professional responsibility To the fullest extent of the law, neither the Publisher nor the authors, contributors, or editors, assume any liability for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions, or ideas contained in the material herein British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress ISBN: 978-0-12-801890-3 For information on all Academic Press publications visit our website at store.elsevier.com Printed and bound in the United States Preface This book is about innovation and entrepreneurship and the role it plays in the US, Chinese, and Indian economies Innovation and entrepreneurship have transformed the Western world, and especially the United States, from agricultural economies of the past, through the Industrial Revolution into the information age of today The impact on the US economy has been to transform the United States into the most dominant economic power of today with the world’s largest GDP However, the information revolution and globalization that we are experiencing today are also transforming the world Fundamental economics, easy and rapid access to information, ease of global travel, and opening up of societies, although in some cases to a limited extent, that were previously completely closed to the West are sowing seeds of change that have the potential of creating a future somewhat different from what we have been used to in the recent past The most significant among these changes is the rapid growth in the economies in other parts of the world—most notably China and perhaps to some extent India—while the growth in the United States has been sputtering Besides, both China and India are increasingly becoming engines of global economic growth and are today the world’s biggest emerging economies with high GDP growth rates Although both China and India have followed different paths to global prominence, because of their peculiar interdependence, they are also sometimes referred to as “Asia’s nonidentical twins” or “Chindia.” While these countries have received the most mention in the recent past, especially during the recent economic downturn in the United States and the resultant job losses, there is also significant growth in other BRICS countries and in the Asia-Pacific region, in general However, in order to keep the scope of the book manageable, and given the expertise and experience of the coauthors, in this book, we confine our attention to looking at the United States, China, and India Also, the case of China is especially compelling, given that by most accounts, its economy is expected to surpass that of the United States in the not too distant future While innovation and entrepreneurship have driven the United States to its present status as the most dominant economic power of today, can the United States continue on that path? China and India used to be dominant economic powers several centuries ago, when the United States was not even on the map or was not very heavily populated With the rise of the West and due to xi xii Preface a number of social and political reasons, these two nations lost their economic clout, and their economies were dwarfed by Western economies While both these countries have shown significant growth in recent decades, can that growth be sustained? If we believe in the premise that innovation and entrepreneurship are indeed vital for long-term growth of a country, can these two nations exhibit that? That brings one to the question, what are the factors that are important for innovation and entrepreneurship to thrive? The book looks at how these factors compare between the United States, China, and India, looks at the evolution of these factors in the past, and assesses the pointers they give us about the future and hence about the likelihood for continued growth in these economies A lot is known and has been written about in the context of innovation and entrepreneurship in the West, and the United States in particular But the same is not true about China and India—not a lot is known in the West either about their distant past or about the recent evolution and the present state of affairs with regard to the fundamentals that drive innovation and entrepreneurship What has been written about innovation and entrepreneurship in these two countries very recently, given the recent growth in their economies, is either very anecdotal or very prescriptive So, the approach we take in this book is to delve far more thoroughly into the fundamentals of these issues as they relate to China and India and, for comparison, discuss their state in the United States The importance of innovation and entrepreneurship to any economy has been recognized since the pioneering work of Joseph Schumpeter A number of books have been written on the subject of “innovation and entrepreneurship” since the landmark book by Peter Drucker on this subject The importance of innovation has been studied and written about especially radical, transformative, or disruptive innovation by a number of authors in recent years, most notably, Clayton Christensen However, while the impact and the results of innovation and entrepreneurship on the economy are generally easy to see, the task of mathematically relating them is extremely challenging This is further complicated by the fact that macroeconomic theory for the best part of the twentieth century has been divided into two opposing philosophical and mathematical camps, which have not shown a sign of coming together until recently and has been discussed by Mankiw While we recognize that a large number of other factors—monetary and fiscal policies, budget and trade deficits, inflation, unemployment, exchange rates, and a host of others—affect the economy in the near term, the long-term vector, an area of macroeconomics that is now known as economic growth, is driven by innovation and entrepreneurship Since the early and pioneering work of Solow, the impact of innovation and other factors on economic growth has been mathematically modeled by a number of economists and, in recent years, most notably, by Acemoglu, Aghion and Howitt, and Barro A number of authors, especially Acs; Audretsch; Parker; Alfaro; Ghani, O’Connell, and Kerr; and others, have attempted to model the impact of entrepreneurship These authors and a number of organizations, such as the World Bank and the OECD, have collected data on entrepreneurship and Preface xiii published entrepreneurial indices Given the qualitative nature of the factors responsible for innovation and entrepreneurship and discussed in the earlier sections of the book, the task of modeling the impact on the economy is next to impossible, also leading to an area of research referred to today as “economic development” as opposed to “economic growth” However, with this recognition, in the third section of the book, we attempt to relate innovation and entrepreneurship to the economy As a backdrop, we provide a brief overview of the present state of macroeconomic theory and economic growth theory and an overview of the approaches to model the impact of innovation and entrepreneurship on the economy along with relevant previous data and propose an approach to be considered for detailed modeling in the future that could be used to tie to data We conclude in the fourth and last section of the book with our thoughts and qualitative assessments about the future of innovation and entrepreneurship and its impact on economic growth and the economies of the United States, China, and India Introduction The book is divided into four parts Part I, Chapters through 9, focuses on innovation; Part II, Chapters 10 through 17, on entrepreneurship; and Part III, Chapters 18 through 21, on the impact on the economy, and in Part IV, the fourth and last part, Chapter 22, we close with conclusions and our thoughts about the future of innovation and entrepreneurship and the resultant economic growth in these parts of the world We begin Part I with Chapter discussing what innovation is, since this is a term that has come to mean a lot of different things to a lot of different people Since the entire first section of the book is devoted to innovation and the role of innovation, we define how we use the word innovation in our book We also then discuss why innovation is important in any economy, and finally, we list the factors that we believe are important contributors for innovation to thrive We further lay the groundwork for the first part of the book in this chapter by briefly comparing and contrasting general innovation trends in the United States, China, and India over the last few years using innovation indices and subindices of the United States, China, and India computed by INSEAD and WIPO In Chapter 2, we discuss the role that history plays in innovation We look at historical GDP in China, India, and the United States and how the roles have reversed in the last couple of centuries We believe that having had a history of innovation does provide a perspective on the intrinsic nature of a culture and its people and a potential proclivity towards reverting to that behavior under the “right circumstances.” We, therefore, trace the role of technology and innovation in the phenomenal rise of China and India in the distant past and examine the factors that obstructed innovation in later years, which resulted in the subsequent decline of these economies We then briefly compare that to the history of innovation in the United States While a lot has been written about the latter and is fairly well known, not much has been written about or known in the West about the history of innovation in China and India So, we first examine that history Among the “right circumstances” that encourage innovative behavior, one of the most important factors is the economy The three key measures of economy that impact technological innovation are R&D expenditures, foreign direct investment and its impact on the flow of knowledge and technology, and the quantity and quality of intellectual property In Chapter 3, we discuss these xv xvi Introduction topics for China and India and trace their evolution and effect through time and compare these to the United States Even if a country has a history of innovation in the past and an economy that is growing rapidly, it may not have the social and cultural factors that encourage the spirit of innovation This is an area that particularly may bring out the contrast between Western societies, such as the United States, and China and India In Chapter 4, we delve into this topic and explore whether there are winds of change in Eastern cultures that might foretell a different future from that of the past In Chapter 5, we explore the role of government and other institutions and the infrastructure of laws and regulations and their impact on creativity and innovation We discuss how these may have evolved over the years in China and India and how they compare with those in the United States and the impact these are having on innovation today and potentially in the future In any developing or emerging economy, especially India and China, the presence of corruption and a significant size “parallel economy” is well known What impact does that have on innovation? It is commonly known that creativity and innovation are at their highest levels in a person’s life during youth, and so is productivity It is, therefore, important to understand how demographics, in general, and its quality in terms of level of education are evolving and changing in all these three regions of the world The onset of an aging population and the resultant influx of immigrants in the West, and the United States in particular, are well known China, on the other hand, is also beginning to face the problem of an aging population although, to a smaller extent, partly caused by its restrictive population growth policies, whereas India is forecast to have one of the youngest populations in the years to come Chinese and Indian immigrants in the United States who were once considered a brain drain from these countries are now playing a significant role in driving innovation in China and India In Chapter 6, we explore these issues and the impact this may have on the future of innovation in these countries In this advanced information economy, innovation requires a population that is technologically sophisticated Hence, the role of schools and universities and the education they provide are very important In Chapter 7, we explore how that is changing in China and India and contrast that to what is happening in the United States We then examine the role of industry and market structures, as well as regional clusters that seem to play an important role in innovation In the United States, regional clusters in the Silicon Valley in the Bay Area and Boston’s Route 128 are of legendary prominence From an industry and market cluster perspective, we have seen the shift in the United States from innovation in traditional industries to the more technology- and software-oriented industries, as well as biotechnology, nanotechnology, pharmaceuticals, and energy We discuss in Chapter these factors in China and India and compare them with those in the United States www.freebookslides.com Appendix Innovation Data 375 Scores of GII creative outputs index and subindices―China 60 Index scores 50 40 Creative outputs Intangible assets Creative goods and services Online creativity 30 20 10 2011 2012 2013 Scores of GII creative outputs index and subindices―India 70 60 Index scores 50 Creative outputs Intangible assets Creative goods and services Online creativity 40 30 20 10 2011 2012 2013 Scores of GII creative outputs index and subindices―United States 70 60 Index scores 50 Creative outputs Intangible assets Creative goods and services Online creativity 40 30 20 10 2011 2012 2013 Constructed from data sourced from several annual reports of GII from www globalinnovationindex.org www.freebookslides.com Index Note: Page numbers followed by “b” indicate boxes, “t” indicate tables, “f” indicate figures and “np” indicate footnotes A Accelerated depreciation allowance, 79 Acceptance of change, 60–61 Achievement opinion, 61–62 AD-AS model See Aggregate demand and aggregate supply (AD-AS) model Administrative staff, and teachers relationship, 129–131 Age population in China, 102, 103t, 163, 163t in India, 102, 103t in US, 102, 103t Aggregate demand and aggregate supply (ADAS) model, 302–303, 304 dynamic, 303 Agrarian society, in China, 202–203 Agricultural economy, in US, 136, 136f Airports Authority of India (AAI), 250–251 Airports, in India, 250–251 Air quality, in China, 168t, 170t AK model of endogenous growth, 296 Ancient Indian Period (4000 BC-185 BC), India history in, 22 Angel investing, in India, 268–269 Anti-monopoly Law of the People’s Republic of China, 220 Antitrust laws, 219 Anti-Unfair Competition Law of the People’s Republic of China, 220–221 Arrow-Debreu dynamic general equilibrium model, 295 Authority, intrapreneurship, 275–276 B Bardeen-Cooper-Schrieffer theory, 309–310 Bayh-Dole Act, 69, 233 BCG See Boston Consulting Group (BCG) Bill and Melinda Gates Foundation, 82–83 The Bill of Rights, 55–56 Bioinformatics sector, in US, 176 Biomedical instrumentation sector, in US, 175 Biomolecular systems sector, in US, 176 Biotechnology sector, in US, 175 Bohai Bay region, industry clusters, 153 Bombay Stock Exchange (BSE), 269–270 Boston Consulting Group (BCG), 277 Bottom of the economic pyramid (BoP) approach, 171, 173 Brain/neuroscience sector, in US, 176 British Patent Law of 1852, 72 The Bronze Age (4000 BC-1900 BC), India history in, 23 Brownian motion, 311 BSE See Bombay Stock Exchange (BSE) Bureaucracy, 55–57 Business in China, 186, 187t in India, 186 in US, 186 Business enterprises, R&D by, 43 Business financing sources, 255, 256f Business regulations, for domestic firms, 265t Business sector R&D, foreign companies in, 45–46 Buy American Act, 80 C Capital availability, in India, 264–271 Capital funds, in China, 263 Caste system, 203 Central Public Sector Enterprises (CPSEs), 222 China age populations in, 102, 103t, 163, 163t agrarian society in, 202–203 air quality in, 168t, 170t business plan competitions, 211 capital funds in, 263 competitive environment, 219–222 control of corruption in, 97, 97f corporate entrepreneurship in, 278–279 corporate ownership in, 147 Cultural Revolution, 15, 19–22 distribution of majors in 1946, 17f doing business in, 186, 187t economic reforms, 195 education in (see Education, China) energy problem, 165, 166f, 167t, 168t 377 www.freebookslides.com 378 Index China (Continued ) enterprise ownership rate in, 206–207, 206f entrepreneurship, 185–187 courses, 211 education, 210–211 presentations and competitions, 211 environmental protection, 171 failure acceptance, 207 family culture, 204 fear of failure rate, 194f feudal system in, 14 free market economy, 219–222 GCI score for, 189, 189f GDP and composition (1952-1978), 18f gains, 349f growth rates, 41f per capita, 161–162 science and technology contribution, 165 Giant Group in, 196–197 government procurement to entrepreneurship, 81–82 to promotion of innovation, 81–82 growth of active iOS and android usage in, 348f higher education from 1936 to 1946, 17t from 1949 to 1978, 20t high-technology sector, 171 history, 10–11 The Feudal Period (221 BC-AD 1911), 11–15 The People’s Republic of China (PRC) (After 1949), 16–22 The Republic of China (1912-1949), 15–16 household income status in, 229t imperial examination system, 14–15, 16 income inequality, 161–162 industry and market structures (see Industry structures, China) industry clusters, 150–155, 154t, 155t influence of rent-seeking and corruption, 94–95 infrastructure, 240–245, 247t innovation ability, 192 intellectual property rights (IPR), 70–72 intrapreneurship, 278–282 labor cost in, 229 level-wise enrollment in, 108t LOC, 195 local economic interests protection, 221 manufacturing sector, 164–165 market competition, 221–222 market economy in, 279 mobile and Internet vs.TV time spent in, 348f necessity-driven entrepreneurs, 231–232, 232f online shopping, 166–171 pillar industries, 154t pollution, 166, 168t, 170t population distribution by education level in, 106f poverty line, 162 power distance, 202 R&D expenditure in, 337 R&D investments in, 44 renewable energy, 171 risk-taking, 193, 194 scientific and technological plan, 85–86 SME Board, 264 social relations, 202 students levels in, 104–106, 105t students studying abroad in, 18f, 109t supportive laws, 234–235 tax policies for entrepreneurship, 76–79 for promotion of innovation, 76–79 TEA, 231, 232f technology transfer, 192 training and consultation services, 214 unemployment in, 228–229, 228f universal trust, 204–205 unmet needs in, 166–171 urbanization rate, 163, 163t value-added per capita, 164–165 value of achievement, 196 venture capital (VC), 263–264 voice and accountability in, 96, 96f westernization movement, 14 working-age population changes in, 102–104, 103t, 104f China New Technology Venture Investment Company, 263–264 China Telecom, intrapreneurship at, 281–282 Chinese traditional culture, 61–62, 64 Christensen, Clayton, Clayton Act, 218 Cobb-Douglas production function, 294, 295, 307 www.freebookslides.com Index Collectivism, 57–58 College entrance exams, 126–128 Commercialization of new technologies, 276 of patented technologies, 71 Community-led enterprises, India, 174 Competition Act, 227 Competitive environment in China, 219–222 in India, 222–227 in US, 217–219 Confucianism, 14, 60–62, 201 Corporate entrepreneurship, 273, 278–279, 345–346 vs start-up entrepreneurship, 273 Corporate innovation, role of, 276 Corporate ownership, in China, 147 Cultural evolution, in US, 63–64 Cultural factors, 342–343 Cultural openness, 59–60 Cultural Revolution, in China, 9, 15, 19–22 Culture, 337–338 defined, 55 D Debt demand and supply, India, 267 Debt market, in US, 263 The Declaration of Independence, 56 Defense procurement system, in US, 80, 81 Demographics, 339–340 dividend in India, 102 innovation impact by, 101 Department of Justice (DoJ), 218–219 Department of Science and Technology (DST), 83 Department of Scientific and Industrial Research (DSIR), 79 Doing Business ranks, 318 Domestic consumption, in China, 166–171 Domestic firms, business regulations for, 265t Dravidian civilization, in India, 22 Drucker, Peter, DSIR See Department of Scientific and Industrial Research (DSIR) Dynamic AD-AS model, 303 Dynamic general equilibrium theory, 301–302 E e-Choupal, 173–174 Economic challenges, in India, 171, 172–173 379 Economic development in China, 165 theories, 297 Economic growth, 4–5, 39–42 entrepreneurship on, impact of, 293–298 innovation on, impact of, 293–298 long-run, 298 models, 296, 307–313 theory, 297, 346 Economic liberalization, in India, 222–223, 224 Economic Recovery Tax Act, 75–76 Economy agricultural, in US, 136, 136f dual, India, 171–172 entrepreneurship in US, 276 free market China, 219–222 India, 222–227 US, 217–219 impact on, 346–349 India, 1950-1989, 36t market, in China, 279 measures of, 337 short-run equilibrium, 304 Education China administrative staff and teachers relationship, 130 college entrance exam, 126–127 education content, 123–126 education expenditures to GDP, 115–116, 116f K-12 education system, 133 memorizing/cramming, 125 passing grades, 124–125 teachers and students relationship, 128 textbooks, 124 university rankings, 122–123 content of, 123–126 expenditures, 115–117 India administrative staff and teachers relationship, 130 college entrance exam, 127–128 education content, 123–126 education expenditures to GDP, 116–117, 117f enrollment in higher education, 120t higher education, 126 vs international curricula, 125–126 K-12 education system, 133 low intensity of R&D, 123 www.freebookslides.com 380 Index Education (Continued ) professional education courses, 121t quality of colleges, 126 R&D institutions in, 117–118, 119t secondary education, 125 teachers and students relationship, 129 university-based research system, 130–131 university rankings, 122–123 United States administrative staff and teachers relationship, 129–130 college entrance exam, 127 communication and teamwork, 125 credit-fueled higher education system, 132–133 education content, 123–126 education expenditures to GDP, 115–116, 116f education infrastructure, 178 K-12 education system, 131–132, 133 passing grades, 124–125 population distributions, education level, 106f teachers and students relationship, 128 textbooks, 124 2-and 4-year colleges, 132–134 university rankings, 122–123 and universities, 340 Emerging Leaders Program, 286 Emigration, 107 Empirical data, on GDP, 317–318 Employment distribution in US, 137f evolution in US, 136, 137f situation, 228–232 unorganized-sector, 230–231 Energy consumption, in China, 165, 166f, 167t, 168t Energy problem in China, 165, 166f, 167t, 168t in India, 172 Energy systems in India, 251 in US, 176, 240 Enterprise ownership rate, 206–207, 206f Entertainment systems and networks, in US, 240 Entrance exams, for college, 126–128 Entrepreneur defined, 184 value of achievement, 196–198 Entrepreneurial opportunities, 308 Entrepreneurial training, 343 Entrepreneurship ability index, 320t activity comparisons, 322f activity levels, 323t aspirations, 321t, 325t attitude index, 319t, 324t capital availability, 342 as career path, 197–198 in China, 185–187 corporate (see Corporate entrepreneurship) courses in China, 211 definition, 183–184 dimensions of, 184 economic growth on, impact of, 293–298 education China, 210–211 India, 212–213 US, 209–210 entrepreneurial training, 343 external environment, 343 factors contributing to, 187–189 government procurement to China, 81–82 US, 80–81 Heritage Foundation measure, 318–329 impact of, 308 improvement-driven opportunity, 192–193, 192f in India, 185–187 infrastructure, 344 innovation ability, 191–193 media attention for, 197f mesoscopic effects, 322–327 model for economic growth with, 307–313 personal characteristics, 342 presentations and competitions, 211 process, 184–185 role of, 293 social and cultural factors, 342–343 tax policies for China, 76–79 US, 75–76 technology transfer, 192 training and consultation services China, 214 India, 214 US, 213–214 in US, 185–187 economy, 276 women in, 205 www.freebookslides.com Index Entrepreneurship Development Cells (EDCs), 212 Entrepreneurship Development Program, 212 Environmental pollution, in China, 166, 168t, 170t EPO See European Patent Office (EPO) Equity demand in India, 267 in MSME, 267 European Patent Office (EPO), 75 Expenditures education, 115–117 R&D (see Research and Experimentation (R&E) expenditures) Experimental development, R&D funds on, 44 F Facilitate intrapreneurship, 275–276 Failure acceptance, 207 Failure-analysis system, 283 Family businesses, in India, 206–207, 224 Family culture, and trust level, 204–207 FDI See Foreign direct investment (FDI) Federal Procurement Law, 80 Federal Trade Commission (FTC), 95–96, 218 Federal Trade Commission Act, 218 Femininity, 62–63 The Feudal Period (221 BC-AD 1911), China history in, 11–15 Feudal system, in China, 14 Feynman-Kac formula, 311 Financial support from government, in US, 256–257 Fledgling business, 276 Fokker-Planck equation, 311 Foreign companies, in business sector R&D, 45–46 Foreign direct investment (FDI), 39, 40–41 companies in India, 45t inflows, 46–48, 47f outflows, 48–49, 49f Free market economy China, 219–222 India, 222–227 US, 217–219 Frugal innovation model, 173 G Gandhian innovation model, 173 GDP See Gross domestic product (GDP) 381 GEDI See Global Entrepreneurship and Development Index (GEDI) Giant Group, in China, 196–197 Giant Network Corporation, intrapreneurship at, 280–281 GII See Global Innovation Index (GII) Ginzburg-Landau model, 309–310 Global Competitiveness Index (GCI), 187–189 local dynamics of competitiveness, 189f structure of, 188f Global Entrepreneurship and Development Index (GEDI), 317, 318 ability index, 320t aspiration index, 321t attitude index, 319t Global Entrepreneurship Monitor (GEM), 318 Global Innovation Index (GII), 5, 6f, 318, 326t framework for, 5f scores, 327f Global markets, online information sharing in, 349f Government institutions, laws/regulations and role of, 338–339 Government of India, promotion of innovation, 88–90 Government procurement to entrepreneurship China, 81–82 India, 82–83 US, 80–81 to promotion of innovation China, 81–82 India, 82–83 US, 80–81 Government Procurement Law, China, 81 Grassroots innovation model, 174 Great Depression of the 1930s, 301 Gross domestic product (GDP), 4–5 based on PPP, 40f, 41f in current prices, 40f empirical data on, 317–318 gains of China, 349f growth rates in China, 41f in India, 41f in US, 41f history of world, 13f, 13t market capitalization to, 255np proportion by sector, 137f of US, 39, 40f Guanxi, 202 www.freebookslides.com 382 Index H Handicrafts clusters, in India, 157 Hart-Scott-Rodino Antitrust Improvements Act, 218 Harvard Business School, entrepreneurship education, 210 Healthcare sector, in US, 175 Health research and procurement, creating demand for, 82–83 Heritage Foundation, measuring economic freedom, 318–329 Higher education in India, 109f institutions in China, 117–118, 118t in US, 118f from 1936 to 1946 in China, 17t High-power-distance society, 55–56 High-technology industry, in China, 138–139 High-technology sector, in China, 171 Honey Bee Network, 174 Household income status, in China, 229t Huawei, intrapreneurship at, 279–280 Hughes, Thomas, 10 I ® IFI CLAIMS 2011, 52t IIT Joint Entrance Exams (IIT-JEE), 127–128 Immigration, 101 Imperial examination system, in China, 14–15, 16 Income inequality, in China, 161–162 Index of Economic Freedom, 318 India age distributions in, 102, 103t angel investing, 268–269 capital availability, 264–271 challenges, 174 community-led enterprises, 174 competitive environment, 222–227 control of corruption in, 97, 97f debt demand and supply, 267 demographic dividend in, 102 doing business in, 186 Dravidian civilization in, 22 dual economy, 171–172 e-Choupal, 173–174 economic challenges, 172–173 economic development, 171 economy, 1950-1989, 36t educational expenditure, 35f educational institutions from 1950-1951 to 1990-1991, 35t education in (see Education, India) 11th Five-Year Plan, 248, 249t energy shortage, 172 enterprise ownership rate in, 206–207, 206f entrepreneurship education, 212–213 entrepreneurship in, 185–187, 197–198 equity demand in, 267 failure acceptance, 207 family businesses, 206–207 family culture, 205 fear of failure rate, 194f fiscal incentives and support measures to industries, 79 free market economy, 222–227 GCI score for, 189, 189f GDP growth rates in, 41f government procurement to entrepreneurship, 82–83 to promotion of innovation, 82–83 grassroots innovation model, 174 handicrafts clusters, 157 higher education in, 31–32 growth of, 33f growth of institutions for, 33f growth of student enrollments, 33f growth of teaching staff, 34f higher level of education in, 109f history ancient Indian period (4000 BC-185 BC), 22 Indus Valley Civilization (4000 BC-1900 BC), 23 Mauryan Empire (321 BC-185 BC), 24 medieval period (100 BC-AD 1600), 24–26 the period of European dominance (17501947), 23–24 postindependence and prereform period: 1947-1990, 31–38 vedic period (1700 BC-500 BC), 23–24 industrial growth in, 341 industry and market structures (see Industry structures, India) industry clusters, 156–158 inequalities, 172 influence of rent-seeking and corruption, 95 informality, 231 infrastructure, 246–253, 247t innovation ability, 192 innovation culture, 157–158 www.freebookslides.com Index institutional voids, 224, 226t intellectual property rights (IPR), 72–75 intrapreneurship, 282–287 IT clusters, 157 LOC, 195 management schools, 212 materialism, 203–204 microenterprises clusters, 157 migrant stocks for, 110f MSME demand for finance in, 266, 266f, 267 necessity-driven entrepreneurs, 231, 232f oligopolistic capitalism, 226 payroll to population rate, 231f political system, 224 poverty, 172 power distance, 202 premier institutes in, 212–213 private equity (PE) investments in, 269 public and private enterprises, 222, 223f R&D expenditures by FDI companies in, 45t R&D spending, 337 regional divergence, 186–187, 188t risk-taking, 194 roads in, 248–250 scientific and technological plan, 86–93 SME exchanges, 269–271 social relations, 203 sources of start-up-phase funding in, 265, 265f, 266t spirituality, 203 students studying abroad in, 110f success of incubators, 213 supportive laws, 235–237 tax policies for entrepreneurship, 79–80 for innovation, 79–80 TEA, 231, 232f technology transfer, 192 training and consultation services, 214 trust level, 205 unemployment rate in, 229–230, 230f unmet needs, 173–174 value of achievement, 196 venture capital (VC), 268–269 exits, 269, 270t investment, 269f voice and accountability in, 96, 96f Indian Patent Office, 75 Indian Patents Act of 1970, 72–73 Indian Patents and Designs Act, 1911, 72 India’s Scientific Policy Resolution of 1958, 86 Individualism, 55, 57–58 383 Indus Entrepreneurs (TiE), 214 Industrial automation sector, in US, 176 Industrial growth, in India, 341 Industrial Revolution, 10 Industry clusters China, 150–155, 154t, 155t India, 156–158 US, 150, 152f Industry sectors, in US, 259t, 260t Industry structures, 340–341 China corporate ownership in, 147 fastest-growing industries, 138–139, 144t high-technology industry, 138–139 new product development, 140–142, 146t, 148t patents granted, 147, 149t return on expenditures, 140–142 India fastest-growing industries, 139–140, 145t firms, 147 index of industrial production, 139–140 innovation intensity, 147 new-to-the-world innovations, 146 patents granted, 150, 151t SMEs, 142, 146, 147 United States agricultural economy to, 136, 136f cluster approaches, 135 employment distribution, 137f evolution of employment, 136, 137f financial benefits, 135 GDP proportion by sector, 137f manufacturing jobs classification, 138t nontradable sectors, 136–138, 137f, 139, 139f patent intensity, 138, 143t tradable sectors, 136–138, 137f, 138t, 141f, 142 Indus Valley Civilization (4000 BC-1900 BC), India history in, 23 Inflows, FDI, 46–48 Influence of rent-seeking and corruption, 93–98 China, 94–95 India, 95 US, 95–98 Information exchange, intrapreneurship, 275 Information infrastructure, in US, 177 Infrastructure China cumulative investment, 240–241 vs India and US, 247t www.freebookslides.com 384 Index Infrastructure (Continued ) infrastructure investment, 240–241 Internet usage, 241–242, 241f telecommunications construction, 245, 246f telephone usage, 242, 244f transportation, 242–245, 245t India, 246–253, 247t airports, 250–251 11th Five-Year Plan, 248, 249t energy, 251 internet, 252–253 ports, 251 railways, 250 roads, 248–250 telecommunications, 252 12th Five-Year Plan, 249t urban infrastructure, 252 United States, 239–240, 247t Initial public offerings (IPOs) in US, 260 venture-backed vs all, 262t Innovation ability, 191–193 based growth models, 307 based models, 4–5 budgets of main departments and agencies, 90t defined, 3–4, 336 economic growth on, impact of, 293–298 factors contributing to, 5–7, 336 impact by demographics, 101 importance of, 4–5, 336 intensity, India, 147 model for economic growth with, 307–313 opportunity areas for, 341–342 China, 161–171 India, 171–174 promotion of, 161 US, 174–179 performance, determination, 39–40 role of, 293, 336–337 technological, 39 Institutions, and universities, 117–123 Instrumentation Development Program, 89 Intellectual Property Appellate Board (IPAB), 74 Intellectual property (IP), protection of, 68–69 Intellectual property rights (IPR), 67 China, 70–72 India, 72–75 protection of, 338 US, 68–75 warrant attention in, 74–75 International innovation system, 93 Internet usage China, 241–242, 241f India, 252–253 Intrapreneurship, 345–346 China, 278–282 at China Telecom, 281–282 defined, 274–275 dimension of, 274–275 facilitate, 275–276 at Giant Network Corporation, 280–281 at Huawei, 279–280 India, 282–287 vs start-up entrepreneurship, 273–274 US, 276–278 Investment, venture capital (VC) in India, 269, 269f in US, 259f, 260f IP See Intellectual property (IP) IPAB See Intellectual Property Appellate Board (IPAB) IPEC See US Intellectual Property Enforcement Coordinator (IPEC) IPOs See Initial public offerings (IPOs) IPR See Intellectual property rights (IPR) IS-LM model, 301, 302–303 IS-LM theory, 301–302 IT clusters, in India, 157 Ito process, 311, 312 J Job Training Partnership Act, 233 Jumpstart Our Business Startups (JOBS) Act of 2012, 261 K The Kauffmann Index, 318 K-12 education system in China and India, 133 in US, 131–132 Keynesian models, 301–302 Keynesian theory, 302 L Labor cost in China, 229, 230t in India, 230t in US, 230t www.freebookslides.com Index Langevin equation, 311 Leadership thinking, 274–275 Legislation on IPR, India, 72 Locus of control (LOC), 194–195 Long-run economic growth, 298 Long-run equilibrium, 304 Low-power-distance society, 55–56 M M&A activities, 48 Macroeconomic parameter, empirical data on, 317 Macroeconomic policy, 298 Manpower Development and Training Act, 232–233 Manufacturing sector in China, 164–165 in US, 176 Market competition in China, 221–222 economy in China, 279 structures, 340–341 in China and India, 138–150 in US, 136–138 Markov process, 311 jump diffusions in, 311–312 Masculinity, 62–63 Materialism, in India, 203–204 Mauryan Empire (321 BC-185 BC), India history in, 24 Media systems and networks, in US, 240 Medieval Period (100 BC-AD 1600), India history in, 24–26 Microenterprises clusters, in India, 157 Micro, small, and medium enterprise (MSME) clusters, 157 debt demand in, 267 demand for finance in India, 266, 266f, 267 equity demand in, 267 growth constraints of, 225b promotion and development of, 235–236 sector, 341 Micro, Small and Medium Enterprises Development (MSMED) Act, 235 Microsoft, in US, 196–197 Migrant stocks, for India, 110f Ministry of Health and Family Welfare, India, 83 Ministry of Micro, Small and Medium Enterprise (MSME), 212 385 Mixed economy model, in India, 222 MNCs See Multinational corporations (MNCs) Monopolies and Restrictive Trade Practices (MRTP) Act, 227 MSME See Micro, small, and medium enterprise (MSME); Ministry of Micro, Small and Medium Enterprise (MSME) Multinational corporations (MNCs), 40–41 firms, 341 innovation intensity for, 147 Mundell-Fleming model, 302–303 N National Association of Foreign Student Advisers (NAFSA), 111–112 National Competition Policy, 226–227 National Entrepreneurship Network, 214 National Innovation Council, India, 86 National Innovation System (NIS) Framework, 135 National Instrument Development Board (NIDB), 89 National Science and Technology Entrepreneurship Development Board (NSTEDB), 212 National Skill Development Corporation (NSDC), 235 Necessity-driven entrepreneurs in China, 231–232, 232f in India, 231, 232f in US, 231–232, 232f Neoclassical-Keynesian synthesis, 301–302 Neoclassical/Schumpeterian model, 307 Neo-Confucianism, 14 New Millennium Indian Technology Leadership Initiatives (NMITLI), 88 New neoclassical synthesis, 301–302 New-to-the-world innovations, 146 NIDB See National Instrument Development Board (NIDB) NMITLI See New Millennium Indian Technology Leadership Initiatives (NMITLI) Nonfinancial enterprises, 94–95 Non-MNCs, innovation intensity for, 147 Nonresident Indians (NRIs) networks, 110 Nontradable sectors, in US, 136–138, 137f, 139, 139f www.freebookslides.com 386 Index O OECD See Organisation for Economic Cooperation and Development (OECD) Oil enterprises, in China, 220 Online shopping, in China, 166–171 Organisation for Economic Co-operation and Development (OECD), 135 control of corruption in, 97, 97f and postsecondary education, 106–107, 107t voice and accountability in, 96, 96f Outflows, FDI, 48–49 P Patent and Trademark Law Amendments Act of 1980, 69 Patent Law, 233 Patents, 49–53 applications, 49, 50 granted by USPTO, 50t US patent assignees, 52t Pearl River Delta, industry clusters, 150–153 The People’s Republic of China (PRC) (After 1949), China history in, 16–22 Performance appraisal systems, intrapreneurship, 275 The Period of European Dominance (17501947), India history in, 23–24 Pharmaceutical Research and Development Support Fund (PRDSF) Program, 89 Pharmaceuticals sector, in US, 176 Pillar industries, in China, 154t Poisson process, 312 Population distribution, by education level in China, 106f in US, 106f Ports, in India, 251 Postindependence and prereform period: 19471990, India history in, 31–38 Postsecondary education, OECD and, 106–107, 107t Poverty, India, 172 Poverty line, China, 162 Poverty syndrome, 59 Power distance, 55–57, 202 Power systems, in US, 240 PPP See Purchasing power parity (PPP) PRC See The People’s Republic of China (PRC) (After 1949) PRDSF Program See Pharmaceutical Research and Development Support Fund (PRDSF) Program Private Equity (PE) investments, in India, 269 Private market capitalization, to GDP, 255np Private sector, in India, 222, 223f Product varieties model, 296 Promotion of innovation government procurement to China, 81–82 US, 80–81 prominent programs, 88–90 tax policies for China, 76–79 US, 75–76 Protection of Plant Varieties and Farmers’ Rights Act of 2001, 74 Public market capitalization, to GDP, 255np Public-private partnership (PPP), 235 Public sector, in India, 222, 223f Purchasing power parity (PPP), GDP based on, 40f, 41f Q Quality-improving innovations, 307 R Railways, in India, 250 Ramsey-Cass-Koopmans model, 295 RBC theory See Real business cycle (RBC) theory R&E See Research and Experimentation (R&E) Real business cycle (RBC) theory, 301 Regional clusters, 340–341 Relevance and Excellence in AChieving new heights in educational institutions (REACH), 88–89 Renewable energy, in China, 171 Rent-seeking and corruption, 95, 96 definition of, 93–94 influence of, 95 level of, 96 negative impact of, 94–95 The Republic of China (1912-1949), China history in, 15–16 Research and Experimentation (R&E) expenditures, 42–46 by business sector, 43–44 in China, 337 by FDI companies in India, 45t www.freebookslides.com Index public institutions involved in (2003-2004), 92f sectors for industrial, 44–45 weighted tax deduction on, 79 Research and Experimentation (R&E) facilities, 48 Research and Experimentation (R&E) funds, on experimental development, 44 Research and Experimentation (R&E) institutions in China, 117–118, 118t in India, 117–118, 119t, 120t, 121t Research and Experimentation (R&E) investment, 44 in India, 147 Research and Experimentation (R&E) spending, in India, 337 Research and Experimentation (R&E) Tax Credit, 75–76 Risk-taking, propensity for, 193–194 Robinson-Patman Act, 218 Robotics sector, in US, 176 S SBA See Small Business Administration (SBA) SBIC program See Small Business Investment Company (SBIC) program SBIRI See Small Business Innovation Research Initiative (SBIRI) SBIR program See Small Business Innovation Research (SBIR) program Scholastic Assessment Test (SAT), 127 School-to-Work Opportunities Act, 233 Schumpeterian growth model, 296 Schumpeterian growth theory, 307 Schumpeter, Joseph, The Science and Technology Policy 2003, India, 86 Science, Research and Innovation system for High Technology led path for India (SRISHTI), 86 Science, Technology and Innovation (STI) Policy 2013, India, 86 Scientific and technological plan China, 85–86 India, 86–93, 87t US, 83–85 Securities and Exchange Commission (SEC), 261 Self-employment, 228 387 Self-organizing complex systems, 309 Self-reinforcement, 310–311 Self-renewal, 274–275 Semiconductor technology, in US, 176 SEZs See Special economic zones (SEZs) Sherman Act, 217–218 Small and medium enterprises (SMEs), 142, 146, 147 entrepreneurship, 185 exchanges in India, 269–271 and Internet users, 242, 243f Promotion Law, 234–235 sector, 341 Small and Medium Enterprises Board (SME Board), in China, 264 Small Business Administration (SBA), 234, 256 Small Business Development Centers (SBDCs), 213–214 Small Business Innovation Research Initiative (SBIRI), 59, 89 Small Business Innovation Research program, 209 Small Business Innovation Research (SBIR) program, 234, 257 Small Business Investment Company (SBIC) program, 256–257 Small Business Jobs Act, 256 Small Business Technology Transfer Act of 1992, 257 Small Business Technology Transfer (STTR) program, 234, 257 Social factors, 342–343 Social relations, 202–204 Solow model, 294, 295, 297, 307, 312 Solow-Swan model See Solow model Space program, in US, 178 Special economic zones (SEZs), 46–47 Spirituality, in India, 203 Start-up entrepreneurship, 274 vs corporate entrepreneurship, 273 vs intrapreneurship, 273–274 Start-up-phase funding, in India, 265, 265f, 266t Start Your Business (SYB) program, 214 State-owned economy, in China, 220 State-owned enterprises, employees in, 217–218 Stock markets capitalization to GDP, 255np in US, 261–262 STTR programs See Small Business Technology Transfer (STTR) programs Student-centered learning, 129 www.freebookslides.com 388 Index Students levels in China, 104–106, 105t and teachers relationship, 128–129 Subsidiary-parent relationship, 284f Sugar Production Technology Mission, 88–89 Supportive laws China, 234–235 India, 235–237 US, 232–234 Surface transportation systems, in US, 240 T Tax incentives, impact of, 79–80 Tax policies for entrepreneurship China, 76–79 India, 79–80 US, 75–76 for promotion of innovation China, 76–79 India, 79–80 US, 75–76 TDDP See Technology Development and Demonstration Program (TDDP) TDPU See Technology Promotion Development and Utilization (TDPU) Teachers and administrative staff relationship, 129–131 as facilitator, 129 and students relationship, 128–129 Technical progress, 4–5 Technological innovation, 39 in China, 16 Technology Development and Demonstration Program (TDDP), 88 Technology Development Board, 88 Technology Information Forecasting and Assessment Council (TIFAC), 88–89 Technology parks, 88 The Technology Policy Statement of 1983, India, 86 Technology Promotion Development and Utilization (TDPU), 88 Technology transfer, to industry, 192 Technopreneur Promotion Programme (TePP), 88, 213, 268 Telecommunications in China, 242, 244f, 245, 246f in India, 252 in US, 239, 347–348 Telemedicine sector, in US, 175 TePP See Technopreneur Promotion Programme (TePP) TIFAC See Technology Information Forecasting and Assessment Council (TIFAC) Total early-stage entrepreneurial activity (TEA), 231, 232f Tradable sectors, in US, 136–138, 137f, 138t, 141f, 142 Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, 71, 73–74 Transnational entrepreneur, 111 Transportation in China, 242–245, 245t in US, 177, 245, 246t TRIPS Agreement See Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement Two-sector AK model, 296 U Uncertainty avoidance, 58–59 Unemployment in China, 228–229, 228f in India, 229–230, 230f in US, 228, 228f United States active iOS and android usage in, 348f advances in telecommunications, 347–348 age distributions in, 102, 103t bond market, 2012, 263f broadband meeting, 241–242, 242t business plan competition, 210 challenges for, 131–134 competitive environment, 217–219 control of corruption in, 97, 97f cultural evolution of, 63–64 debt market, 263 defense procurement system in, 80, 81 doing business in, 186 economy, entrepreneurship in, 276 education in (see Education, United States) employment distribution in, 137f enterprise ownership rate in, 206–207, 206f entrepreneurship education, 209–210 entrepreneurship in, 185–187 failure acceptance, 207 fear of failure rate, 194f financial support from government, 256–257 free market economy, 217–219 www.freebookslides.com Index GCI score for, 189, 189f GDP growth rates in, 41f government procurement to entrepreneurship, 80–81 to promotion of innovation, 80–81 gross domestic product (GDP) of, 39, 40f history of innovation in, 10–11 income gap, 179 individualism, 207 industry and market structures (see Industry structures, United States) industry clusters, 150, 152f industry sectors in VC-backed jobs, 259t VC-backed revenue, 260t infrastructure, 239–240, 247t initial public offerings (IPOs) in, 260, 262t innovation ability, 191–192 intellectual property rights, 68–75 intrapreneurship, 276–278 investments, 175 LOC, 195, 198 lost in translation, 175 Microsoft in, 196–197 mobile and Internet vs.TV time spent in, 348f necessity-driven entrepreneurs, 231–232, 232f new growth in, 175, 176, 177, 178 opportunity-driven innovation, 175 patent assignees, 52t patent intensity, 138, 143t population distributions by education level, 106f power distance, 202 reverse innovation, 174–175 risk-taking, 193, 194 scientific and technological plan, 83–85 social relations, 203 stock markets, 261–262 supportive laws, 232–234 tax policies for entrepreneurship, 75–76 for innovation, 75–76 TEA, 231, 232f technology transfer, 192 training and consultation services, 213–214 transportation, 245, 246t trust level, 205–206 unemployment in, 228, 228f value of achievement, 196 venture capital (VC), 257–260, 258t exits, 262t 389 impact on economy, 260 industry, 260 investment, 259f, 260f voice and accountability in, 96, 96f Universities education and, 340 institutions and, 117–123 Unmet needs in China, 166–171 India, in, 173–174 Unorganized-sector employment, 230–231 Urban infrastructure, in India, 252 Urbanization rate in China, 163, 163t in world, 164t US Intellectual Property Enforcement Coordinator (IPEC), 69–70 US Patent and Trademark Office (USPTO), 75 V Value-added tax (VAT), 77 Value creation, VAT See Value-added tax (VAT) VC See Venture capital (VC) Vedic Period (1700 BC-500 BC), India history in, 23–24 Venture capital (VC) in India, 268–269 exit, 269, 270t investment, 269f in US, 257–260, 258t exits, 262t impact on economy, 260 industry, 260 investment, 259f, 260f, 261f Voice and accountability, 96, 96f W Warrant attention, in IPR system, 74–75 Weighted tax deduction on expenses, 79 on R&D expenditures, 79 Westernization movement, in China, 14 Whipps, Heather, 10 Wiener process, 311 WIPO See World Intellectual Property Organization (WIPO) Worker Adjustment and Retraining Notification Act, 233 www.freebookslides.com 390 Index Working-age population changes, in China, 102–104, 103t, 104f World Intellectual Property Organization (WIPO), 70 WTO’s trading system, 73–74 Y Yangtze River Delta, industry clusters, 150–153 Youth Employment and Demonstration Projects Act, 232–233 ...Innovation, Entrepreneurship, and the Economy in the US, China, and India Innovation, Entrepreneurship, and the Economy in the US, China, and India Historical Perspectives and Future... the years in China and India and how they compare with those in the United States and the impact these are having on innovation today and potentially in the future In any developing or emerging... indices and subindices of the United States, China, and India computed by INSEAD and WIPO In Chapter 2, we discuss the role that history plays in innovation We look at historical GDP in China, India,