Innovation strategies of small firms in South Africa
Date
2015
Authors
Muringani, Jonathan
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Abstract
Small firms form the majority of firms in many countries. There is evidence that small firms are highly innovative, contribute to economic growth and job creation. Yet, despite their importance and levels of innovativeness, small firms are largely treated as ‘black boxes’, meaning that very little is known about their innovation strategies and distinctiveness as compared with larger firms. This relative scarcity of conceptual treatment and the dearth of empirical evidence apply globally, particularly to low and medium income countries such as South Africa. This study, therefore, explores the innovation strategies of small firms in South Africa, their implications and the extent to which these strategies enable small firms to achieve their goals or objectives.
Innovation studies and entrepreneurship theories argue that innovation is influenced by characteristic and contextual factors interacting at individual, firm, and industry levels, as well as local, regional, national and global levels. This presents a challenge as well as a motivation for small firm owner-managers in low and medium income countries to fashion responses, and also design and devise appropriate innovation strategies under severe operating conditions. The conceptual framework argues that innovation strategies in small firms are a dynamic interplay between three elements (1) initial conditions for innovation (2) the motivations and intended outcomes of innovation and (3) the specific innovation process. This framework anticipates considerable variation of these elements among firms.
This study seeks to contribute to the understanding of innovation in small firms from the point of view of low and medium income countries such as South Africa. The findings of this study will equip small firm owner managers with usable and intelligent information for managing and organising innovation activities. In addition, these findings will provide relevant insights and recommendations to stakeholders wishing to promote and facilitate innovation in small firms.
The research method is a qualitative, exploratory cross sectional study of ten small firms either based at The Innovation Hub, a facility in Pretoria, South Africa that provides ancillary support in the area of innovation or have benefited from related support programmes such as Technology Innovation Agency (TIA). Semi-structured
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interviews were conducted with small firm owner managers serving as primary participants and public innovation support programme managers as key informants respectively. The participants were selected using purposive sampling involving both criterion and convenience sampling. The data was analysed through an interpretive paradigm using the Ritchie and Spencer’s (1994) framework analysis.
The key findings of the study reveal that the aforementioned conceptual framework rings true. It shows that innovation strategies in small firms are a dynamic interplay of three main elements (1) initial conditions for innovation, (2) the motivations and intended outcomes of innovation and (3) the specific innovation process. The findings highlight that while some characteristic and contextual factors facilitate innovation, innovation in small firms, particularly start-ups, is generally constrained due to limited internal resources and a hostile external environment. As a result, small firms are limited to ideas from the owner managers and their personal networks. In response, they are likely to develop products and services in-house but seek vertical cooperation with external partners, mainly established large firms, in order to take their products and services to market.
The implications of these findings suggest that if small firms are expected to successfully perform innovation activities, owner managers must adopt a number of important practices. These include having a long term strategic orientation, using formal planning tools, being open to other sources of ideas beyond themselves and their personal networks, and willingness to improve their business skills. Interested stakeholders should consider tailor made interventions that support and address the specificities of small firms close to the point of action. Furthermore, policy makers must design coherent policies that make it easier for small firms to operate.
The limitation of this study is that this is a cross sectional study of only ten firms and thus no generalisations can be made about small firms in South Africa. The study is also unable to ascertain the long term impact of the findings. In addition, the research focuses mainly on product innovation with less emphasis on other types of innovation. Future studies should consider a large cross sectional study representative of small firms in South Africa and/or a longitudinal study of one, few or more firms, other types of innovation as well as the unintended consequences of innovation.
Description
Thesis (M.M. (Innovation Studies))--University of the Witwatersrand, Faculty of Commerce, Law and management, Graduate School of Business Administration, 2014.