Determinants of Innovation in Small Manufacturing Firms : Evidence from the South African Business Innovation Survey

The purpose of this paper is to investigate the factors that influence innovation activities in small manufacturing sector firms. The constructs employed in this paper are assembled into general firm characteristics, organizational structure, firm strategies, and sectoral conditions and relations categories. This study uses 138 responses from small South African firms as contained in the Community Innovation Surveys styled fifth national South African innovation survey, conducted between 2010 and 2012. Appropriate hypotheses were derived and tested by multivariate probit regression analysis. The results show the positive influences of the firm's age and size by number of employees, a mix of linkages to internal and external knowledge sources, investment in (a) formal R&D department in plant, (b) investment in R&D intensity and (c) a skilled workforce, foreign ownership and government support on the propensity to innovate. Some knowledge source linkages, size of the firm by turnover and the size of the degreed workforce show a negative influence. The generalisability of the findings may be limited by the fact that the present study was focussed on small manufacturing sector firms that responded to the fifth national South African innovation survey. Prior South African studies on the determinants of innovations were based on the first and second national innovation surveys. The findings of this study offer a more recent insight into innovation strategies in small firms. Finally, very little is known about the innovation activities in small firms in Sub Saharan Africa in general, and South Africa specifically. A further implication of this study is that the findings also help stakeholders consider a variety of relationships that are likely to improve the innovation performance of small firms are suggested and discussed