APPENDIX 19
Memorandum by the James E. Lynch India
& South Asia Business Centre, Centre for International Business,
University of Leeds
OBJECTIVES
This document identifies the extent to which
knowledge on Indian business is extremely limited, with devastating
consequences for policy-makers.
The case for a government-funded academic centre
exclusively devoted to the understanding of the rise of India
as a driver of globalisation follows. Important, yet overlooked
research topics are then identified and activities that contribute
to the long-term competitiveness of UK firms in India are then
highlighted.
RECENT TRENDS
IN INTERNATIONAL
AND INDIAN
BUSINESS
1. The changing world economy is characterised
by the opening up of emerging economies, and the simultaneously
globalisation and regionalisation of markets, in an attempt to
secure the economic development and performance benefits of exploiting
international business. Countries have adopted policies to make
themselves more profitable locations in order to attract investment.
For their part, firms respond by seeking performance gains, but
also interact with policy formation. In turn, governments also
have to balance equity and efficiency in their policies.
2. India is an emerging player in world
business, at a time when globalisation is gathering pace. It has
taken second place to China, in terms of business activity and
location, in the past decade. It has potential similar to China,
however, and shares with it many characteristics such as a population
of well over a billion, low wage costs, dramatic internal wealth
disparities, a focus on inward foreign investment, a liberalising
and reforming economy, a huge internal market and an important
business-oriented Diaspora. Following the implementation of internal
reforms leading to a reorientation of its economic direction,
India has the potential to play a major role in the globalisation
process that characterises the world economy in the 21st century.
This will create challenges, not only for India itself and its
firms, but also for Western firms, governments and citizens.
3. The terms of reference of the inquiry
state that "some commentators have expressed fears that UK
businesses have been too slow to see the potential offered by
India, and the risks of not taking its competition seriously".
This, and other issues related to the implications of the rise
of India in international business have virtually received no
attention by the academic community and policy-makers in the Western
world. At a recent meeting of the India Group of the Commonwealth
Business Council, the Chief Executive of Inward Investment at
UKTI publicly acknowledged that the British government did not
know in what conditions the increasing number of takeovers of
UK firms by Indian companies would benefit UK plc.
4. Data on foreign direct investment into
India are scarce. The United Nations' yearly publication World
Investment Report does not record the destination of outward investment
for each country. The UK's ONS identifies the amount of British
investment into India but it is difficult to identify with precision
whether the UK has been lagging behind other countries. As a rule,
FDI into China is ten times that of FDI into India. The global
inward stock of FDI in India amounted $39,000 million in 2004
(against £245,000 million for China). India has an immense
potential, but early FDI figures do not suggest UK firms have
taken India seriously. Indeed, while 5% of British investments
in Asia were located in India in 2000, this percentage declined
to 3.5% by 2004 according to official UK statistics. Meanwhile,
the worldwide stock of direct investment in India more than doubled
over the same period according to official United Nations statistics,
to amount $39,000 million.
5. The absence of knowledge on India is
worrying. International business academia has followed international
business practice, and has devoted much more attention to China
than to India. Large analyst firms do not devote much attention
to India either. When analysts do look at India, data are at best
inaccurate or suspect. There is therefore a clear need to repair
this glaring inadequacy in the attention structure of business
and management academia and policy-makers.
6. Leeds University Business School is the
only higher education institution in the UK to have sought to
address this inadequacy by creating an India and South Asia Business
Centre. In Europe, the Paris-based INSEAD made a public announcement
in 2004 that it was seeking £3 million to create a similar
structure. To date, we know of no other research institute in
the academic world (outside India itself) which concentrates specifically
on business and management in India and South Asia—with
the exception of the India and South Asia Business Centre (ISABC)
at the University of Leeds.
7. Initiatives that seek to generate knowledge
on Indian business and the implications of its increasing importance
on the UK and the European Union to guide the policy-making process
exist independently of government funding. It is worrying that
no UK funding body has made India a priority yet.
JAMES E. LYNCH
INDIA AND
SOUTH ASIA
BUSINESS CENTRE
8. The James E. Lynch India and South Asia
Centre (ISABC) was founded in 2004 under the Strategic Research
Infrastructure Fund II scheme. This follows the creation five
years earlier, of the Institute for Research on Contemporary China
(IRCC). The two centres are physically located next to each other,
within the premises of the Centre for International Business (CIBUL),
the world's leading research centre in international business
(independent study to be published in International Business Research,
2006).
9. Leeds University Business School (LUBS)
contributed to the initial funding of the India Centre, which
enabled the conversion of a row of terraced-houses at the heart
of the University of Leeds' campus into state-of-the-art, dedicated
research facilities for the understanding of Indian business.
10. A total of £400k has been invested
in the facilities. The India Centre, to be formally launched in
2006, exists independently of government funding to generate knowledge
on the implications of the rise of India and disseminate it to
academics, policy-makers and the business community.
11. Understanding trends in international
business related to India in general, and the multi-faceted issues
that arise from the growing role of India in the globalisation
process requires a multi-disciplinary approach that can be best
embedded within a research centre. Traditional single-discipline
approaches, associated with conventionally-funded university Chairs,
have resulted in a lack of responsiveness.
12. The creation of new knowledge, with
which to inform all users and beneficiaries at all levels, requires
the exploitation of economies of scale, of scope (cross-fertilisation
in multidisciplinary teams), of duration (specific investments),
and of joint production, in the form of shared facilities. This
requires substantial initial investment, and long-term support
for the basic research, and economies of synergy to work through
to the strategic output stage.
13. Very little research has been conducted
on any aspect of Indian business practices. This follows the lack
of dedicated research structures. Instead, India has been seen
so far as a case study, as part of wider-range research. A dedicated
structure with a physical location enables knowledge assimilation
and knowledge sharing among multi-disciplinary teams of researchers
and practitioners.
14. The ISABC aims to contribute to increased
competitiveness of UK firms in India by focusing on three key
objectives. The key research mission of the India and South Asia
Business Centre encompasses the following elements.
15. The generation of knowledge to guide
policy-makers
Only a dedicated research centre can address
the problems, issues and opportunities that are faced by Indian-based
and UK-based firms, in relation to the emergence and opening of
India-the globalisation of competition, and its implication in
terms of foreign market servicing strategies for Indian and European
firms. Issues of particular importance, on which very little is
known at present, include:
— Foreign market servicing strategies
of Indian firms within India itself and abroad, and non-Indian
firms in India.
— Inward and outward foreign direct
investment into/from India, its trends and characteristics, its
impact on firm performance.
— The rise of "Third World Multinationals"
and challenges posed by the internationalisation of Indian firms;
contrasts with the experience of Malaysian and Chinese firms.
— The specificities of Indian management
practices, and their contribution to the process of globalisation;
the implications of internationalisation by Indian firms on structures,
culture and management; the link between ownership structure,
internationalisation and performance in an Indian context.
— The Indian outsourcing industry and
the challenges posed by its expansion to Indian, non-Indian firms
and governments.
— Comparative research on India v China,
especially in the area of foreign direct investment and knowledge
management in multinational firms (with IIM-A).
The ISABC has created a unique database at firm-level
that can be used to identify trends in UK-India trade and investment
relationship and assess the impact of these on firms' performance
and competitiveness.
16. The dissemination of research findings
to benefit policy-makers and the academic and business communities:
— A web site acting as a gateway to
existing research in the area of Indian business, with specific
sections targeted at academics, practitioners, and policy-makers.
— The conduct of self-financing Management
Development Programmes, in India and the UK.
— The publication of research reports
and articles targeted at specific audiences in academics' and
practitioners' journals, the business and financial press—in
partnership with the Financial Times.
— The compilation and harmonisation
of existing databases on inward and outward foreign direct investment
flows and stocks between India and key other countries.
— The creation of unique datasets on
aspects of Indian v. Chinese business at firm- and industry-level.
— The conduct of self-financing Management
Development Programmes, in India and the UK.
— Research publications related to
projects identified above, and published in top international
business and management journals, with a strong focus on policy-
and business-implications.
— Database dissemination to an audience
of business and financial analysts, researchers, business users.
This activity will be income-generating.
— Management Development Programmes
and short courses, both in the UK and India where there is a clear
market need and where the course subjects and client base are
complementary to the research mission of the centre. This activity
will be income generating.
— Focused seminars on topics such as
"Doing business with India", in partnership with UKTI,
targeted at first-time UK investor/exporter in India. This activity
will be income-generating too.
17. Knowledge Transfer Partnership
A government-funded India and South Asia Business
Centre should also act as a forum where companies and managers
with an interest in India can meet, and exchange information both
with one another and with the researchers based in the Centre.
In an area where there is so little existing research, and where
the business opportunities are so big, it is hoped that the mutual
exchange of information, ideas and experience, will be perceived
to be profitable to all the parties concerned. The Centre is ideally
suited to implement Knowledge Transfer Partnerships, funded by
the Department of Trade and Industry, between the University of
Leeds and UK firms wishing to do business in India. The ISABC
has been involved with UKTI West Yorkshire to organise one-day
events on issues related to "doing business with India".
18. Capacity building in research on Indian
Business to ensure long-term competitiveness
Research training courses and seminars to be
provided for doctoral students with interests in India and South
Asia. An ESRC-recognised research training programme could be
designed to enhance the research skills of doctoral students in
the UK involved in qualitative research methods with particular
reference to emerging markets.
9 January 2006
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