A quantitative analysis of obstacles to innovation among small, micro, and medium-sized enterprises: Evidence from South Africa

Abstract

Firm-level innovation in sub-Saharan Africa remains under-researched. To address this gap, this paper examines the obstacles to innovation faced by small, micro, and medium-sized enterprises (SMMEs) in South Africa. Using the 2018 Business Innovation Survey, we apply the double-hurdle model to investigate factors determining a firm’s decision to invest, and the intensity of innovation. Our results show that cost and institutional obstacles were significantly more important as disincentive factors for medium-sized enterprises while knowledge obstacles were significant disincentive factors for large enterprises. In addition, market obstacles hampered investment among large enterprises. Interestingly, none of these factors was found to deter innovation intensity among small and micro enterprises. The study findings suggest that there is no one-size-fits-all approach to innovation policy and intervention programmes to support innovation within firms of different sizes.

Keywords:

• SMMEs
• innovation
• deterring obstacles
• revealed obstacles
• innovation investment
• South Africa

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 Two of the authors were CeSTII employees and therefore had access to the data. As per the employee code of conduct at CeSTII and the HSRC, firm-level information was treated with strict confidence by all authors.

2 While employment numbers are recommended by the Oslo Manual to categorise firms into different sizes, this was not possible since the business register did not have sufficient information on employment (CeSTII 2020).