Product innovation in emerging economies: product architecture and organisational capabilities in Geely and Tata

The aim of this paper is to provide a perspective on the sources of innovation that underlie the creation of low-cost products in emerging economies. It differs from previous analyses in its emphasis on the influence that country specific factors can have, opening the possibility that similar firms, with similar products and similar goals may follow fundamentally different trajectories. It presents two case studies from the automobile industry in China and India, Geely and Tata that show precisely this phenomenon. Building on its capability for flexibility and responsiveness and the existence of a loosely-coupled network of suppliers, Geely took a quasi-open approach to the product architecture for its vehicles. Tata on the other hand followed a broadly closed integral approach to product architecture, building on its vertically integrated structure and tradition of frugal innovation. Based on these case studies, existing theory concerning the co-evolution of product architecture and organisational capabilities and using a process of abductive reasoning, we present a framework that can be used to explain this divergence. The framework highlights the interactions between a product's architecture, a firm's organisational capabilities and country specific external factors such as institutions, industry, markets and technology.