Page 7 - Special Issue Modern Trends in Scientific Research and Development, Case of Asia

International Journal of Trend in Scientific Research and Development (IJTSRD) @ www.ijtsrd.com eISSN: 2456-6470

their service profile by partnering with external knowledge addition, 150 to 1 ratio of applications to admitted students
sources . for IIMs. This competition for admission is even fiercer when
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compared to admission rates in the top U.S. schools such as
Another point of view in support of the assumption that the Massachusetts Institute of Technology (MIT), where the
resilient financial system can foster innovational companies applicant to admitted ratio stands at around ten to one .
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is difficulties of financing startups in their early stages of This competitive landscape and the increasing number of
development in emerging economies, where financial system strong students have provided India with a natural
is not diversified as it is in the advanced economies. Unless advantage, positioning its top institutions as some of the best
startups have sufficient tangible assets to pledge as in the world. Average scores at top universities have been in
collateral, bank loans are generally not available to them. India’s favor for a superior innovation ranking, not only
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Even if they have such assets, banks in emerging economies among its peers but also among all nations .
are often reluctant to lend in the absence of sufficient credit
information and ill-defined legal rights pertaining to secure Financial development is a critical and inextricable part of
transactions. Not surprisingly, therefore, loan-to-GDP ratios the economic growth process. Well-functioning financial
in these economies generally fall far short of those in systems help mobilize savings, promote information sharing,
advanced economies, suggesting that a significant number of improve resource allocation, and facilitate diversification
companies are underserved or even unserved by banks and and risk management . Recent research shows that the
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must rely on their founders’ resources or those of friends relationship between finance and growth is probably
and family. Unless external finance becomes available, nonlinear, there is substantial evidence that financial
startups are unable to grow and reach the stage where they development significantly boosts economic growth in the
become profitable due to the limited and unpredictable earlier phases of the development process following a
nature of these resources. While startups in advanced virtuous cycle: financial development encourages savings,
economies face the same challenge, they are more likely to which in turn fosters real activity, and as real activity
be able to bridge the so-called Valley of Death by tapping into expands, finance grows in response to increasing demand for
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alternative funding pools, such as angel investing, venture its services from the nonfinancial sector .
capital, and emerging forms of financing. As with their
banking systems and organized financial markets, most Analysis
emerging economies’ alternative funding pools have yet to Advancements in digital finance affect other areas, too. For
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achieve similar penetration levels to advanced economies . instance, entrepreneurs can more easily access capital from
So new types of financing such as crowd-funding, angel friends and family over longer distances, even overseas, due
investing and other forms assist potential startups to grow to to technological progress in money transfer services. At the
the self-sustaining level. However, the attractiveness of same time, new forms of financial intermediation have
emerging economies for angel investors or incubators is low emerged thanks to increased investments in financial
because of poor infrastructure, high level of corruption, low technology (fintech). While consumer lending dominates the
level of transparency in financial transactions and other crowd-funding market, business lending is the second largest
negative factors. But continuous development of science and category measured by transaction amounts.
technology through state programs carefully designed for the
development of innovative activity has proved to be effective
in the example of China and India. The wide range of S&T
policies that China has implemented and adjusted in the past
three decades has directly affected its innovation outcomes.
From 2002 to 2012, China’s GDP more than quadrupled,
leaping from $2 trillion to $8.7 trillion. The data reveal that
these policies have effectively advanced the development of
an innovation ecosystem; they have also brought about a
large, educated workforce, laying a solid foundation for the
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future development of innovation capacity in the country .

India has developed a stable foundation for scientific,
technological, and business education by setting up centers
of excellence such as the Indian Institutes of Science (IISC),
20/news/50739176_1_1-26-lakh-students-jointentrance-exam-
the Indian Institutes of Technology (IITs), and the Indian iit-seat.
Institutes of Management (IIMs). Admission to these premier 12 PwC (PricewaterhouseCoopers), 2012. India—Higher
Indian institutions has consistently been competitive, with a Education Sector: Opportunities for Private Participation.
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50 to 1 application to admitted student ratio for IITs . In Available at
https://www.pwc.in/en_IN/in/assets/pdfs/industries/educatio
nservices. pdf.
8 A.Mina, E.B.Bascavusoglu-Mareau, A.Hughes-Open service 13 L.Casanova, P.K.Cornelius, S.Dutta –“Financing
innovation and the firm’s search for external knowledge entrepreneurship and innovation in Emerging Markets”. P.121
9 L.Casanova, P.K.Cornelius, S.Dutta –“Financing entrepreneurship 14 Levine, R., 2005. Finance and Growth: Theory and Evidence. In:
and innovation in Emerging Markets”. P.14. Aghion, P., Durlauf, S. (Eds.), Handbook of Economic Growth.
10 L.Casanova, P.K.Cornelius, S.Dutta –“Financing Elsevier Science, Amsterdam, pp. 866–934.
entrepreneurship and innovation in Emerging Markets”. P.73 15 Sahay, R., Cihak, M., N’Diaye, P., Barajas, A., Bi, R., Ayala, D., Gao,
11 Basu, S.D., 2014. Race to IITs just got tougher; number of Y., Kyobe, A., Ngyyen, L., Saborowski, C., Svirydzenka, K., Yousefi,
candidates who qualified in JEE advanced 6,360 more than last S.R., 2015. Rethinking financial deepening: stability and growth
year. The Economic Times, 20 June. Available at http://articles. in emerging markets. IMF Staff Discussion Note, SDN/15/08.
economictimes.indiatimes.com/2014-06- International Monetary Fund, Washington, DC.

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