According to the research paper titled The Relative Advantage of Marketing over Technological

Capabilities in Influencing New Product Performance: The Moderating Role of Country

Institutions, marketing capabilities have a stronger influence compared to technological
capabilities on new product performance but this effect is moderated by institutional context
factors. The impact of the capabilities on performance depends on two characteristics of
knowledge imitability and mobility.
For the purpose of our analysis, we will proceed with the following assumptions:
1. We will measure the new product performance of iPhone 6s and 6s Plus, launched in
September 2015 in the US and October 2015 in India.
2. The competitor product: Samsung Galaxy S6 and S6 Edge, launched in April 2015 in
India and the US.
3. The institutional factors for a particular country in 2015 will be treated the same for both
Apple and Samsung products, despite varying dates of launch in that country.
4. As in the research paper, we will only be considering new product success as
performance measure for both companies instead of overall firm performance.
5. Performance for the products will be measured up to 5 months after launch in each
country.
MODERATING ROLE OF INSTITUTIONS

Socioeconomic System: GDP Growth Rate

Elucidated in the research paper is the point that marketing capabilities, compared with
technological capabilities, primarily drive new product success in markets with low growth rates.
This competitive advantage reduces for rapidly developing markets.

FIGURE: India GDP Annual Growth Rate

Seen in the figure above, India is a high annual GDP growth rate market. It had 7.6% annual
GDP growth in 2015. In contrast, as shown in the Figure below, United States is a low annual
GDP growth rate market and this number was 2.4% in 2015.

FIGURE: US GDP Growth Rate

Consequently, we can say that as licensing of technologies is less common in rapidly developing
markets like India, there is lower imitability of technological capabilities. Similarly, mobility
applies to markets like the US with low growth rates where licensing is more common. This
increases competitive advantage for Apple as they do not have to disclose critical information
about the technology, hindering competitors from using this information for their own
technology developments. Apple was operating in India through its distributors and this enabled
the company to leverage its technological capability in the premium mobile segment of the
country.
Hence, considering this component, the relative advantage of marketing over technological
capabilities for Apple related to new product performance decreases in India.

Regulative System: Rule of Law

We know that technological knowledge is likely to be more imitable and mobile than marketing
knowledge as the latter is based on tacit knowledge and is not codified. According to the research
paper, rule of law facilitates technology based innovations. Therefore, the influence of
technological capabilities on new product success is stronger in countries with strong rules of
law.
In 2015, India was ranked 76th out of 175 countries in Transparency Internationals Corruption
Perceptions Index, which is the second least corruption rank in the whole of South Asia. As

mentioned by Ronald Inglehart and Christian Welzel in their paper Modernization, Cultural
Change and Democracy, corruption is the opposite of rule of law. It undermines the effectiveness
of civil rights.

FIGURE: Formal and Effective Versions of Liberal Democracy

Shown in the figure above, we can see that India ranks high on presence of formal democracy
and low on effective democracy. India is at the 75th percentile of formal democracy and on the
30th percentile in effective democracy due to the presence of elite corruption.
Formal democracy preserves authoritarian structures. Without effective democracy, these
structures lead to red tapism and corruption in the country. By filing a patent application with US
Patent Trademark Office (UPTO), protection can be sought in 143 countries. However, a country
like India does not have strong regulative systems and hence, does not support the control and
restriction of imitability and mobility of capabilities of a company.
Thus, we can say that the regulative system in India supports marketing capability of Apple over
its technological capability due to the presence of small imitator brands and competitors that can
copy its technology with little to no consequence. This makes market transactions costly and

uncertain. In a price conscious market like India, such imitations can prove disastrous for Apple
as the same technology will be provided at lower cost to customers.
The bottom line, in this case, is that the relative advantage of marketing over technological
capabilities related to new product performance increases due to low rule of law in India.

Cultural System: Ingleharts Cultural Values

Mentioned in the research paper titled The Relative Advantage of Marketing over Technological
Capabilities in Influencing New Product Performance: The Moderating Role of Country
Institutions, we know the importance of Ingleharts measures of culture as it takes into
consideration the cultural changes within countries.

FIGURE: Ingleharts Cultural Map of the World

Inglehart proposed two major and separate dimensions that capture cultural changes and
differences across societies:
1. Traditional Values Moving Toward Secular-Rational Values
2. Survival Values Moving Toward Self-Expression Values

As shown in the Figure above, India is in the Traditional Values pole. It is a society where
religion is very important and is characterized by high levels of national pride, parent-child ties
and deference to authority. India also ranks high on corruption and low on effective democracy.
This means that it does not have a strong governance structure that can control and restrict
imitability and mobility of technological capability.
The marketing capability of a company will be more important for India, according to the
Traditional Values pole, as the strategy will have to be customized according to the strong
traditional values permeating in the culture.
According to Inglehart, India also ranks low on Self-Expression Values. It is still largely focused
on Survival Values. In 2015, it was revealed by the World Bank, that Indias poverty rate
decreased to 12.4% compared to the 21% estimate of 2011-12. However, with 172 million people
in India below the poverty line, the country still has a large population focused on survival.
India is a largely price conscious market with only 0.3% of its population in the affluent category
(net worth over USD 1,00,000). Due to the large population of the country, this still translates
into 2.4 million people. India is also home to 3% of the global middle class with 23.6 million
people.
Therefore, though the Survival Values are high in India, Apple still has a large market in the
country to sell its premium phones to. Tweaking its marketing capability to address the diversity
of needs of consumers and to communicate identity-related messages to consumers in India can
prove beneficial for Apple in the long run. Accepted in the research paper is the point that selfexpression values can be addressed by technological capabilities as well. An example was given
of Apple providing superior technology that helps consumers to express their identity.
Thus, we can say that despite a higher proportion of the Indian population being below the
poverty line, Apple products capture the highest share in the premium segment through
deployment of strategies based on a mix of marketing and technological capabilities. The
company can also consider lowering the price of the next iPhone to increase its overall market
share in the country.