Abstract
ABSTRACTTwenty years after apartheid was formally abolished, black handicraft exporters in Cape Town still innovate significantly less than their white counterparts. This study explains these differences based on the segmentation of business and innovation systems, a novel approach that aims to contribute to a deeper understanding of path dependency in South Africa. The study concludes that the business system is segmented between formal and informal firms and that such segmentation is correlated with race. Despite path dependency, a group of black entrepreneurs has managed to breach the barriers, owing to the ongoing support of an intermediate organisation, intense networking and risk-taking.
Highlights
The economy of South Africa comprises both formal and informal firms (Ligthelm, 2008; Bischoff & Wood, 2013), with the former being owned mainly by white entrepreneurs and the latter mainly by black entrepreneurs (Devey et al, 2006; Herrington et al, 2010)
Various elements of the business system are expected to have a direct impact on innovation practices, and together form an innovation system (Lundvall, 2007). Segmentation of such an innovation system might result in major differences in innovation outcomes between formal and informal firms, which might in turn reinforce the segmentation of the business system
The findings of the study are first presented in terms of the path dependency model, through an analysis of the segmentation of the business system and the innovation system, as well as resulting differences in innovation outcomes
Summary
The economy of South Africa comprises both formal and informal firms (Ligthelm, 2008; Bischoff & Wood, 2013), with the former being owned mainly by white entrepreneurs and the latter mainly by black entrepreneurs (Devey et al, 2006; Herrington et al, 2010). Black South Africans face more barriers in starting and running a formal firm than do their white counterparts. These barriers are related to factors such as access to education (Kruss et al, 2010), government support (Ashman & Fine, 2013) and social networks (Adato et al, 2006). The literature appears silent on the segmentation of business systems in South Africa, and an analysis of this concept would contribute to a deeper understanding of path dependency and racial determination of the formal and informal sectors
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