Innovation sets the developed countries apart from underdeveloped ones. By Amit Sharma*.

Globalisation and the phenomenon of outsourcing have led to many countries of the developing world becoming the talk of business circles. CEOs of several large-sized companies in the West are increasingly concerned that unless they develop sound outsourcing arrangements, they might be compelled to pack up.

This has translated into newer employment avenues in other, lower cost countries.

It is estimated that over 100,000 people, mostly engineers, work for the top three Indian IT service giants (Tata Consultancy Service, Infosys Technologies and Wipro).

But as economists point out repeatedly these opportunities in developing countries are simply too small and insignificant to overhaul the entire economy in any real sense. The IT / ITeS services sector contributes only 3.3 per cent to India''s GDP. So while there is the warmth of hope surrounding us, there is also the cold reality lurking in the larger beyond — will the islands of growth that globalisation has created encompass the larger canvass?

The answer, to a large extent, lies in one skill that developed countries are on an average much better at and, which has accelerated and sustainable economic development in the last century — innovation.

While the engine of innovation may not be the panacea for all developing countries, it is certainly the strong suite of developed countries. Consider the following:

• According to Robert Solow, Nobel laureate in economics, at least half of the economic growth during the past 50 years came from innovation that has created new technologies, industries and jobs.
• Intel CEO Craig Barret recently said that "US competitiveness in global markets and the creation of good jobs at home rely increasingly on the cutting edge innovation that stems from high-risk basic research".

Barret talks about the crucial role that the phenomenon of innovation plays in the wealth creation process. While the scientist discovers new knowledge and creates new technologies, it is the innovator who takes scientific and technological inventions and uses them to catalyse the economic engine.

Very often, we fail to appreciate the real world significance of how innovation shapes the world around us (and our lives) in invisible but profound ways

What does it signify when they say that innovation creates new wealth? To highlight the significance, let me take you to a place which is an entirely different world from its surroundings — a place aloof of all the problems that we associate with the developing world. Let me take you to the sprawling campus of Infosys Technologies at Bangalore, a place where I work (on innovation, not surprisingly) and play (with innovation, again).

More than 13,000 professionals work at the Electronics City campus in Bangalore. The campus provides amenities like food courts, ATMs and bank extension counters, and a mini golf course. It is usual for foreign dignitaries visiting Bangalore to make a visit to the campus. The Food Court at the Bangalore centre is a hyperbolic parabola, designed on the lines of the Sydney Harbor Opera House.

Around 4,000 quadratic equations were crunched to get the structure right. The Infosys gym at its Bangalore centre is one of Asia''s largest where employees work out after office hours and on weekends. Other facilities include pool / snooker tables, a swimming pool, a sauna and a Jacuzzi.

Such an office complex was unimaginable twenty years ago. How was it made possible? It was the result of an innovation that Infosys and other top-tier IT services players in India have mastered in the last 15 years — the ''global delivery model''. According to the reigning authority on innovation and the proponent of the disruptive theory of innovation, Harvard Professor Clayton Christensen, the global delivery model is a "truly disruptive innovation on a global scale".

The global delivery model is the expertise in breaking down a software engineering problem into different modules, and then carrying out development and maintenance work using geographically distributed teams, using well defined processes and slick project management. It is a discipline which Infosys and other top-tier IT services companies in India have indeed perfected, and which has over the years proved to be their main competitive advantage.

The whole point of this illustration is that people in developing countries do not talk about innovation often enough. When they do, it is more as an afterthought to other, more important things. But if there is one tool that can, in a very real, practical, sense, solve the problems of developing countries, it is innovation.

Innovation and productivity
We often talk about population as one of the main problems afflicting developing countries. However, Japan''s population density of 333 persons per sq. km exceeds India''s, and yet the nation has been able to overtake India by leaps and bounds in the last 50 years. The truth is that for every mouth there are two hands that work so long as productive employment is available.

Productive employment is generated by scientific and technological developments applied to the real world to create value — innovation. Bill Gates has continually exploited the innovations taking place in the world of personal and enterprise computing to create wealth for himself, for thousands of Microsoft employees, and for hundreds of thousands of people working in industries which depend on Microsoft for their business.

The US semiconductor industry (based on the evolution of integrated circuit technologies) alone is estimated to have created 226,000 jobs with world-wide sales of $166 billion in 2003.

Basic research at leading US universities has created 4,000 spin-off companies that hired 1.1 million employees and have annual world sales of $232 billion.

High per-capita productivity seems to typify the workforce in developed countries. Here is what Dr. J. Bradford DeLong, professor of economics at the University of California at Berkeley has to say, " Two hundred and fifty years ago, everyone was very poor by our standards today — even by third world standards today. Then the world changed, and the industrial revolution came. Technological progress accelerated to become fast enough to outstrip population growth and generate rising standards of living. As standards of living rose, death rates fell and birth rates fell as populations underwent the demographic transition to low fertility and low rates of population growth. The world became an enormously richer place."

This is a good articulation of how innovation leads to productivity improvements. In simple terms, on an average each person creates more and more value for society. This, unfortunately, has not been happening in countries like India for the last 50 years. Today, an Indian''s average productivity is much lower than that of his counterparts in developing countries. On the other hand, consider the Infosys example. With innovation, the company has been able to create a rich environment and large amounts of wealth and can afford to offer a superior lifestyle to its employees.

The Infosys example is intended to offer others a glimpse of what is possible. There are already thousands of promising entrepreneurs in India and even if a handful of them succeed, we are looking at a bright future.''

*The author is technical specialist at Software Engineering Technology Labs, the corporate R&D division of Infosys Technologies, Bangalore.