From made in China to discover in China: Reverse innovation & reverse technology transfer

Wednesday, 15 October 2014: 11:50 AM
Marine Hadengue, M.Sc.A , Industrial Engineering, Polytechnique Montreal, Montreal, QC, Canada
Nathalie de Marcellis-Warin, Ph.D , Polytechnique Montreal, Montreal, QC, Canada
Thierry Warin, Ph.D , International Business, HEC Montreal, Montreal, QC, Canada
A new phenomenon just appeared in the last few years: multinationals are opening research and development centers (R&D) in emerging countries. The emergence of the Chinese, Indian and Bresilian giants leads to the growth of an important middle class to conquer if multinational firms want to survive the second globalization[1] (Trimble, 2012). This reality moves the knowledge frontier and reverse innovation is a direct result of this upheaval. Reverse innovation is when a product is first adopted in developing or emerging countries before spreading in the developed world (Govindarajan & Ramamurti, 2011). Expanding R&D efforts in the developing world is then necessary but represents also an important opportunity for multinationals.

In this article we addressed new research strategies employed by big pharmaceutical companies in emerging countries (in particular China) and new paradigms arising in terms of innovation and technology transfer. We made three propositions: (1) Today China represents a new world center for research and innovation; (2) Big pharmaceutical companies practice reverse innovation; (3) Collaborations and calls for collaborations between these big pharmaceutical companies in China with local firms aim to sharing the knowledge already accumulated by local actors, involving reverse technology transfer.

Our methodology is twofold. To show that China is now a world center for innovation, we first studied the evolution of patents delivered in China (proposition 1). In a second part, we used qualitative methods to let emerge new paradigms related to the first proposition. Based on reverse innovation and technology transfer fundamentals established by the litterature, we identified a set of specific criteria related to firms that actually do reverse innovation and reverse technology transfer. We then looked at the 10 biggest pharmaceutical companies in term of revenues and we analysed official discours available for each of them to validate propositions 2 and 3.

With this work, we first confirmed that China is no longer the factory of the world. The country is moving quickly toward being the new worldclass laboratory for research and development. Then, exploring paradigm changes related to this phenomenon, we argued that big pharmaceutical companies embrace reverse innovation and reverse technology transfer strategies. Although these phenomenons are still difficult to measure, we showed that even in a sector where intellectual property is very sensitive, the path of the future goes on this way.

[1] The second globalization is a concept developed by Baldwin (2012).

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