Medium-sized enterprises (MSEs) are vital contributors to economic growth, innovation, and job creation. However, despite their significant role in driving industrial and technological progress, MSEs face unique challenges that often impede their potential. Limited access to resources, high costs of R&D, fragmented innovation efforts, and difficulties in securing investments are just a few of the barriers that restrict their growth. These challenges are particularly pronounced in developing economies like India, where MSEs play a crucial role in addressing societal needs while competing on a global scale.
To bridge these gaps, the concept of shared innovation hubs has emerged as a transformative solution. These hubs provide a collaborative environment where enterprises can pool resources, share expertise, and work collectively on cutting-edge research and development projects. India has already taken significant strides in fostering such ecosystems through initiatives like the NASSCOM Centre of Excellence, Forge Innovation Accelerator, and Kerala Startup Mission. These platforms exemplify how collaboration, mentorship, and financial support can empower MSEs to overcome their constraints and thrive.
This document explores the challenges faced by MSEs, the current state of shared innovation hubs in India, and actionable recommendations for the government to further promote this concept. By addressing these issues and leveraging the potential of shared hubs, India can unlock new opportunities for innovation and position itself as a leader in the global innovation landscape.
Challenges faced by Medium Sized Businesses
- Resource Limitations for MSEs
Medium-sized enterprises (MSEs) often face significant constraints in accessing the resources necessary for robust research and development (R&D). Unlike larger corporations, they lack specialized facilities, advanced technologies, and the financial capacity to sustain extensive R&D efforts, limiting their ability to innovate and compete effectively. - High Cost of Innovation
Independent R&D initiatives can be prohibitively expensive for MSEs. The costs of hiring skilled professionals, acquiring advanced equipment, and conducting research projects create financial burdens that many medium-sized enterprises cannot shoulder alone, reducing their ability to innovate. - Siloed Innovation Efforts
A lack of collaboration between enterprises results in isolated innovation efforts. This not only leads to duplicated efforts but also prevents the sharing of ideas and expertise, which could enhance creativity and efficiency. - Slow Time-to-Market
MSEs operating independently often struggle with delays in bringing new products to market. Limited resources and fragmented processes impede their ability to streamline R&D efforts, which is essential for staying competitive in fast-paced industries. - Knowledge and Expertise Gaps
Many MSEs do not have access to specialized skills or the latest knowledge in their fields. This lack of expertise can hinder their ability to develop cutting-edge solutions, making them reliant on external support or partnerships, which are not always readily available. - Risk Aversion
Due to their limited resources, MSEs are often risk-averse when it comes to investing in R&D. The high potential for failure in innovation projects makes them hesitant to commit, leading to missed opportunities for breakthrough advancements. - Coordination and Communication Challenges
Collaboration between multiple enterprises can be difficult to manage, especially when teams have varying organizational cultures and working styles. These differences can result in miscommunication, inefficiencies, and a lack of cohesion in joint projects. - Intellectual Property Concerns
A key barrier to collaboration is the concern over intellectual property (IP) rights. MSEs may fear losing control over proprietary information or not receiving adequate credit for their contributions, making them reluctant to participate in shared innovation hubs. - Difficulty Attracting Investment
MSEs often find it challenging to secure funding for R&D projects, particularly when they operate independently. Investors and funding agencies may perceive solo efforts as less viable or impactful compared to collaborative initiatives with broader scope and scale. - Resource Allocation Inequities
In collaborative settings, disputes over the fair distribution of costs, benefits, and access to shared resources are common. These disagreements can erode trust and create friction among participants, potentially undermining the success of shared innovation hubs.
Addressing these challenges requires strategic planning, robust governance, and a culture of trust and collaboration to ensure that shared innovation hubs achieve their intended goals of fostering innovation and driving growth for MSEs.
Current State of Innovation Hubs in India
The current state of shared innovation hubs and collaborative R&D among medium-sized enterprises (MSEs) in India is characterized by several key data points:
- Limited Adoption of Artificial Intelligence (AI) in Innovation Management: A study published in the Indian Journal of Commerce and Management Studies indicates that Indian small and medium-sized enterprises (SMEs) face challenges in implementing AI for innovation management. These challenges include human resource constraints, ethical considerations, technological limitations, organizational hurdles, and economic factors.
- Barriers to Innovation: Research by the Asian Development Bank Institute identifies significant obstacles hindering innovation in Indian SMEs. These barriers encompass funding constraints, a shortage of skilled R&D workforce, and weak linkages between institutions and firms.
- Challenges in Open Innovation Adoption: An analysis in the International Entrepreneurship and Management Journal highlights that traditional SMEs in India encounter difficulties when engaging in open innovation through university-industry-government collaborations. Challenges include managing inter-organizational relationships and aligning project goals.
- Role of Business Incubation in Driving Innovation: A report by the Ministry of Micro, Small and Medium Enterprises (MSME) emphasizes the importance of business incubation services in fostering innovation among Indian SMEs. The report suggests that structured incubation can enhance the innovation capabilities of these enterprises.
- Impact of Innovation Management on Sustainability: A recent study in the International Entrepreneurship and Management Journal examines how innovation management influences the sustainability of SMEs. The research suggests that effective innovation management, mediated through entrepreneurship, positively affects the sustainability of these enterprises.
Work in India on R&D Centers
NASSCOM CoE – IoT & AI (Centre of Excellence for IoT and AI)
The NASSCOM Centre of Excellence for Internet of Things (IoT) and Artificial Intelligence (AI) is India’s largest deep-tech innovation ecosystem, uniting startups, innovators, enterprises, and government entities. Established as part of the Digital India initiative, its primary mission is to address real-world challenges by leveraging advanced technologies, including IoT, AI, Data Science, Big Data, Augmented and Virtual Reality (AR/VR), Machine Learning, and Robotics.
The Centre operates on the #FAME model, which encompasses Funding, Incubation, Acceleration, Mentorship, and Enterprise Connect. This framework supports startups in securing investments, accessing expert guidance, and establishing connections with enterprises to facilitate higher-level engagements. Additionally, the Centre offers state-of-the-art facilities through its #InnovateLab, equipped with tools such as vector signal generators, high-frequency oscilloscopes, digital multimeters, and development kits, enabling hardware startups to expedite product development.
Through its Co-create Program, the Centre addresses industry challenges by scouting and connecting suitable startups with enterprises. This initiative fosters collaborations that lead to potential orders, go-to-market strategies, acquisitions, or investments. The Centre’s initiatives span various sectors, including Agritech, Healthtech, Robotics, and Industry 4.0, promoting innovation across multiple domains.
Furthermore, the Centre boasts a diverse team of mentors from leading organizations such as Barclays, Tata Consultancy Services, Google, and Mahindra. These experts provide invaluable guidance in areas like AI, advanced analytics, manufacturing, retail, energy management, and supply chain intelligence, contributing significantly to the growth and success of startups within the ecosystem.
Forge Innovation Accelerator
Forge has established strong collaborations with the Government of Tamil Nadu to position the state as a leading innovation-driven economy in India. It also serves as a knowledge and capabilities partner to India’s Ministry of Defence and Defence Services, where it contributes to the development of advanced technological solutions that address critical national needs.
The organization has formed strategic alliances with corporations such as Vedanta, focusing on leadership in the digital era of energy and resources. Through programs like the Vedanta Global Corp. Accelerator & Ventures, Forge facilitates joint technology and product development, fosters commercial partnerships, and supports strategic investments to drive innovation in the industrial sector.
In the urban sector, Forge collaborates with the Ministry of Housing and Urban Affairs (MoHUA) and various state governments to tackle challenges faced by smart cities and urban local bodies. By leveraging startup-driven innovation, Forge plays a pivotal role in transforming urban sectors across India, promoting efficiency and sustainability.
Forge offers incubation and acceleration services tailored to early-stage startups, providing essential resources such as seed funding, mentorship, and access to state-of-the-art industrial innovation labs. Programs like the Defence Startups Accelerator and the Smart Cities Innovation Ecosystem are designed to address sector-specific challenges and enable startups to develop technologically advanced solutions.
Through schemes such as the Startup India Seed Fund Scheme (SISFS) and NIDHI PRAYAS, Forge provides financial support to startups, ranging from innovation grants of up to ₹20 lakh to investments of up to ₹50 lakh. These funds help entrepreneurs transform innovative ideas into viable, market-ready products, accelerating their journey to success.
Kerala Startup Mission (KSUM)
Kerala Startup Mission (KSUM) serves as the central agency of the Government of Kerala for promoting entrepreneurship and supporting the state’s startup ecosystem. Established in 2006, KSUM oversees the implementation of the Kerala Technology Startup Policy and has taken various steps to foster innovation and entrepreneurship. It has created a vibrant startup ecosystem interlinking schools, colleges, incubators, government institutions, and startups to nurture a culture of innovation and investment in Kerala.
KSUM offers a range of schemes and funding opportunities to support startups, SMEs, MSMEs, and research institutions. These schemes, provided by various ministries and agencies of the Government of India, include financial assistance, innovation grants, and seed funding to help entrepreneurs develop their products and scale their businesses. The organization also provides comprehensive funding guidelines to help startups navigate venture capital and other funding sources effectively.
The agency operates incubation and acceleration programs designed to assist startups at every stage of their journey. Startups registered in Kerala can access subsidized incubation spaces, scale-up programs, and accelerator initiatives to achieve enterprise-level growth. KSUM’s innovation grants and seed funding programs further empower entrepreneurs to develop new products and services that address market needs.
KSUM places a strong focus on inclusivity by running specialized programs for women entrepreneurs and student innovators. These initiatives aim to provide the necessary resources, mentorship, and platforms for these groups to thrive in the competitive startup ecosystem.
With over 63 incubators and one million square feet of office space, KSUM has supported more than 2,900 startups, disbursing grants exceeding ₹25 crore and managing a fund of funds worth ₹750 crore. Recognized as a top performer in the States’ Startup Ranking by DPIIT in 2018, 2019, and 2021, KSUM continues to empower future-proof products and business models, significantly contributing to Kerala’s economic growth and innovation landscape.
Recommendations for Government to Promote Shared Innovation Hubs
- Establish Dedicated Funding Programs for Shared Hubs
Governments should create funding schemes specifically aimed at setting up and supporting shared innovation hubs. This can include grants, subsidies, and low-interest loans for the development of physical and virtual collaboration spaces equipped with cutting-edge facilities. Providing financial incentives for MSEs to join these hubs will encourage participation and foster innovation. - Facilitate Public-Private Partnerships (PPPs)
Encourage collaborations between government agencies, private corporations, academic institutions, and startups to create sustainable shared innovation ecosystems. Public-Private Partnerships can offer the infrastructure, expertise, and resources needed to accelerate R&D while sharing the associated risks and costs. - Incentivize Collaborative R&D through Tax Benefits
Governments can provide tax benefits to enterprises that engage in collaborative R&D within shared innovation hubs. Offering deductions on R&D expenses, waivers on import duties for lab equipment, or tax holidays for hub participants can make collaboration more financially attractive. - Develop Industry-Specific Hubs Aligned with National Priorities
Create shared innovation hubs tailored to specific industries such as agriculture, healthcare, renewable energy, and digital technologies, aligning with national development priorities. These hubs should address sector-specific challenges, promote knowledge-sharing, and support the commercialization of solutions with a clear focus on scalability and sustainability.
Conclusion
Medium-sized enterprises (MSEs) hold immense potential for driving innovation, but they face significant challenges such as resource limitations, high costs, fragmented efforts, and a lack of expertise. These constraints hinder their ability to scale, innovate, and compete effectively in today’s dynamic global economy. In India, initiatives like the NASSCOM CoE for IoT & AI, Forge Innovation Accelerator, and Kerala Startup Mission (KSUM) highlight the critical role of shared innovation hubs in addressing these challenges. By fostering collaboration, offering funding support, and providing access to state-of-the-art resources, these hubs empower MSEs to overcome barriers and unlock their potential.
To further accelerate this momentum, the government can play a pivotal role by establishing dedicated funding programs, facilitating public-private partnerships, and incentivizing collaborative R&D through tax benefits. Additionally, developing industry-specific hubs aligned with national priorities can enhance the effectiveness of these initiatives, ensuring they address sector-specific challenges while promoting scalability and sustainability.
With strategic planning, robust governance, and a culture of trust and collaboration, shared innovation hubs can become a cornerstone of India’s innovation ecosystem. They offer a path forward for MSEs to achieve sustainable growth, contribute to national development, and establish India as a global leader in technology and innovation.
