Firm Innovation and Employment in South Africa: Examining the Role of Export Participation and Innovation Novelty

ABSTRACT

This paper studies the effects of process innovation and product innovation on firm-level employment in South Africa. We contribute through two novel extensions, analyzing how export status and the degree of novelty of innovation affect the innovation-employment relationship. We find process innovation to be more employment generating than product innovation. Furthermore, both process and product innovations have larger positive effects on employment growth for exporting firms relative to non-exporting firms. Finally, firms that introduce radical innovations that are new to the market, experience a higher positive employment effect than firms that introduce innovations that are new to only the firm.

KEYWORDS:

• Process innovation
• product innovation
• employment
• exporting firms
• South Africa

JEL:

• D2
• J23
• L2
• O14
• O33

Acknowledgments

We acknowledge the Centre for Science, Technology and Innovation Indicators at the Human Sciences Research Council for the use of National Innovation Survey data referred to in this article. We also thank Atoko Kasongo for facilitating access to the latest wave of the data.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary Material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/1540496X.2022.2098012

Notes

1. As discussed in Harrison et al. (2014), the plans and expenditures for these types of innovations are typically made in advance of implementation, therefore are unlikely to be correlated with unforeseen productivity shocks.

2. We use industry-level price indices provided by Statistics South Africa (StatsSA) (South Africa’s statutory statistics agency) to deflate sales.

3. These three waves were commissioned by the Department of Science and Innovation (DSI) from the Center for Science, Technology and Innovation Indicators (CeSTII), a statistical and policy research unit located within the Human Sciences Research Council. See Kraemer-Mbula and Sehlapelo (2016).

4. The first wave was conducted for the period 2002 to 2004, but it does not have all the variables of interest and therefore, was not used here.

5. The first year of data provided within each survey is based on firm recall.

6. While broadly representative of the South African population of firms, there may be some oversampling of large firms in the NIS. Kerr, Wittenberg, and Arrow (2014) use data from the South African Quarterly Employment Survey and show that, in 2010, 50% of firms had fewer than 50 employees, 18% were classified as medium, and about 32% were classified as large. Kerr, Wittenberg, and Arrow (2014) show that 35% of firms were in the manufacturing sector and 49% of firms were in the services sectors that are represented in our survey dataset, therefore the sectoral composition correlates with that of the population of firms.

Additional information

Funding

This research was supported by the National Research Foundation through the project ‘Community of Practice in Industrialisation and Innovation’ (grant number 110691), hosted by the DSI/NRF South African Research Chair in Industrial Development (grant number 98627), University of Johannesburg.