When analysts encounter the observation that Indian businesses chronically underinvest in research and development, the instinct is to reach for systemic explanations and to resist cultural ones. The resistance is not unreasonable. Cultural explanations, carelessly deployed, slide into stereotypes, and stereotypes foreclose rather than illuminate. Yet the categorical rejection of culture as an explanatory variable creates its own blind spot, because some of the most persuasive systemic explanations turn out, on inspection, to incorporate cultural elements — not as fixed ethnic traits but as historically conditioned orientations that may change as the circumstances that produced them change.

The truth, as usual, lies in the interaction between multiple causes, none of which is individually sufficient.

The captive market and its seductions

Begin with the most structurally respectable explanation: India’s domestic market is vast, and vastness, paradoxically, can be an impediment. A large captive market insulates producers from the bracing pressure of export competition, which has historically been the driving force behind quality improvement and technological upgrading. This is the R&D equivalent of Dutch disease — the same abundance that appears to be an asset quietly erodes the competitive muscle that exposure to harder markets would build. Companies that can grow for decades by serving a billion-plus consumers without venturing beyond the Subcontinent have little incentive to invest in the costly, uncertain process of frontier innovation. Why develop a better product when the existing one sells readily?

The long........

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