ABSTRACT
In the post-liberalization period, India has slowly but steadily tried to foster innovation to boost global competitiveness of the industrial sector. Since innovation in Indian industries for a long time has been supported by adaptation, assimilation and incremental changes on technology transferred from overseas, reforms smoothened the progress of the inflow of foreign direct investment (FDI). Several efforts were made to facilitate technology paradigm and technology trajectory shifts, in order to improve competitive efficiency of Indian manufacturing so that they could become globally competitive. FDI was looked upon as a major source of technology paradigm shift for Indian manufacturing, especially since the research and development (R&D) intensity of majority of the firms in the manufacturing industry has been very low (less than 1%) for long period of time. Industries where R&D intensity has been higher than the national average have looked for opportunities to world markets and earned the crucial foreign exchange (Kumar 2002). Firms in Indian manufacturing industries have also attempted to bring about technological upgradation through imports of design and drawings (disembodied technology) against lump sum, royalty and technical knowhow fees, and imports of capital machinery (embodied technology), where the technology is embodied in the capital good itself. The in-house R&D efforts were often directed to adapt the imported technology to suit the local resource and market conditions.
