By Shad Morris, James Oldroyd, Ryan Allen, Daniel Han Ming Chng and Jian Han

Multinational companies (MNCs) of every size and sector are pushing for new and more effective ways to solve their biggest problems – and they are not fussy about where such innovation comes from. While global innovation has traditionally come from developed economies, increasingly the spotlight is being turned on emerging economies, as they continue to overturn conventional wisdom and create solutions suitable for deployment across global markets, not merely their own localities.

The view that global innovation mostly flows from developed economies is in part due to the greater presence of lead customers (sophisticated users who push the boundaries of a given product to articulate problems and opportunities) combined with easier access to a wide range of external experts (even those from other countries and industries) who can help connect the dots between users’ concerns and novel solutions.

However, a study we conducted shows that emerging economies’ lack of lead customers and external expert access are not the Achilles’ Heel it was once considered to be. Our research shows that for R&D teams in emerging economies, it is not as important who they speak to, but rather how they interact with customers and experts during the problem and solution search phases. Our main findings are:

• R&D teams in emerging economies can successfully generate global innovations by contextually observing local (proximate) customers. Access to lead customers is not a prerequisite.
• Neither is it necessary for R&D teams to consult external experts from innovation hubs. Units that actively uncover useful principles and question existing assumptions about products can drive global innovation, regardless of whether these solutions come from internal resources or far-flung external experts.
• An innovation process that appears oriented toward local modification can actually be oriented toward global innovation. Behavioural approaches matter more than structural constraints.

These insights were derived from an inductive, multiple cases research involving R&D units from six different foreign MNCs operating in China. These MNCs are headquartered in the US, Germany, Switzerland, Netherlands, and Sweden, and they span multiple industries. Our data sources include interviews, site visits, and archival data analysis.

Emerging economies tend to have large young populations that are digitally savvy, embrace change, and are open to experimenting with new technologies and products. Our findings demonstrate that this makes them viable sources of global innovation, not just solutions focusing on modifying existing products to local market needs. China, in particular, continues to demonstrate its capacity for generating first-tier global innovations.

Accordingly, MNCs must recognise that it is not just a case of connecting R&D units with the right networks; they must think carefully about how R&D teams will discover, share and use the relevant knowledge to drive global innovation, even when their available sources may seem limited at first glance. In many cases involving R&D in emerging economies, this will require alternative or even unconventional approaches, and leadership figures should incentivise the behaviours of contextual observation and uncovering useful knowledge principles.

In our study, we observed that the first step in developing globally innovative ideas was not just interacting with or surveying the right kinds of customers but being deeply aware of how they use the products and services in real-world contexts. Observing proximate customers in context allowed these R&D teams to notice undiscovered problems and unmet needs. Armed with this knowledge, they could question existing product design assumptions and develop novel innovations.

At the same time, MNCs should be willing to look deeper, comparing innovations created in emerging economies with those in developed economies, to fully explore how these solutions were reached, rather than focusing on who their R&D teams interact with. This may lead to further innovation breakthroughs that apply across the MNC’s holdings, rather than a single region or territory. By attending to the actual behaviors of R&D teams rather than just the structure of the innovation process or their social networks, MNCs can move their R&D efforts in emerging economies from local modification to developing global innovations. 

This article refers to a study entitled, “From Local Modification to Global Innovation: How Research Units in Emerging Economies Innovate for the World,” by Shad Morris, James Oldroyd, Ryan Allen, Daniel Han Ming Chng, Jian Han published in the Journal of International Business Studies here.

Shad Morris is the William F. Edwards Distinguished Fellow and Professor of Management and James Oldroyd is an Associate Professor of Strategy, both at Brigham Young University. Ryan Allen is a PhD candidate at Harvard University. Daniel Han Ming Chng is an Associate Professor of Strategy and Entrepreneurship at CEIBS. Jian Han is a Professor of Management at CEIBS.