Closing the Loop of Innovation: How Can Firms From Developed Markets Apply Innovation From Emerging Markets?

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Consumer segments in emerging markets are characterized heterogeneity. The upper relatively affluent consumer segments are usually well served by international companies often hailing from industrialized nations, while the rapidly growing demand by lower-end consumer segments tends to be under-served. At the same time, multinational companies (MNCs) increasingly realize the necessity to shift their center of gravity and to participate in this growth in emerging markets. Traditionally, Western MNCs had developed innovations for the consumers and contexts of developed markets to transfer (and eventually adapt) them to emerging markets in the course of their international lifecycle. However, it becomes increasingly clear, that for innovations to be successful in lower-end consumer segments, they have to be specifically developed (specialized) for the needs (such as simplicity, robustness and low-cost) of these consumers and their market context. The specialization of innovations for lower-end consumer segments in emerging markets represents challenge and opportunity at the same time: Affordable and simple innovations of good quality experience increasing demand in developed markets too. Innovations that diffuse to developed markets only after having been introduced in emerging markets first reverse the traditional flow of innovations and thus have been labeled reverse innovation by innovation research. According to Resource Advantage Theory, such specialized innovations from emerging markets can generate a global comparative advantage for MNCs if they are recognized by the corporation and effectively transferred throughout the corporate network for their global application. This research project aims at identifying the factors that influence the successful specialization of innovations for emerging markets as well as their corporate recognition and transfer to developed markets. The overarching research question How can MNCs from developed markets apply innovations from emerging markets on the global stage? is split in two, to enable throughout analysis of the subject of interest: How can MNCs from developed markets successfully develop and market innovations for lower-end consumer segments in emerging markets? (specialization) and How can MNCs enable the transfer of innovations from emerging to developed markets? (recognition and transfer). Due to a lack of prior research in the field of emerging markets and reverse innovation, this project plans to initially build theory and conceptual insights on the base of qualitative research and the application of a Straussian Grounded Theory approach. Generated findings will be tested and validated by subsequent quantitative studies in the frame of this project.