The role of innovation in an emerging market: Evidence from South Africa

Abstract

ABSTRACT South Africa’s high unemployment rate threatens to destabilise the country. This is evidenced by the increasing frequency of service delivery protests that are often characterised by conflict and violence. This combination of factors has the potential to trigger national chaos if an immediate and long term solution is not sought. Innovation has played an important role in improving the economies of countries like China, the United States of America and even some European nations. They have leveraged ideation to stimulate economic growth and widen employment options. South Africa has experienced the effects of a stagnant economy for some years now. The country’s policies have seen little change since the global financial crisis in 2008. A number of factors that have impacted the country’s growth such as political uncertainty, a volatile industrial labour market, and unstable global commodity prices. South Africa is ranked low on the Global innovation index and is thus described as ‘not being very innovative’. The study examined the role played by innovation in improving economic growth as well as reducing unemployment. The results show that there is an inextricable link between the Gross Domestic Product (GDP), innovation and unemployment levels. The significance of these relationships, however, is not in isolation of other variables like human capital, wages, business cycle and capital formation.