The importance of innovation for firm performance in the Automotive Component Manufacturing Industry in South Africa

The Automotive innovation system is a complex network that includes various role-players. Relatively few of the OEM´s design, manufacture, integrate and market vehicles in the automotive value chain. The first tier of suppliers is made up of large, technologically sophisticated suppliers which develop, integrate and deliver complete systems. However, they rely heavily on layers of suppliers for the supply of various components and parts. Between these first tier suppliers and the OEM the path for innovation is set though the system as a whole benefit from more efficient processes, higher quality and cost reductions. This research questions the importance of innovation in the Automotive Component Manufacturing Industry in South Africa and its objectives is to find indicators of innovative activities in the Industry and to link those to firm performance. The research found that South African firms in this Industry are much more involved in innovation activities than most other manufacturers and that their innovation activities are focussed on areas that can make a significant contribution to firm performance. Most firms are involved in innovation activities, irrespective whether they are local or foreign owned or whether they have an official R&D department or not. Since this Industry contributes significantly to the South African Gross Domestic Product, it is importance to add the finding from this research to the body of knowledge that will guide policymakers in Government and in the Private Sector with respect to the importance of innovation and to create incentives to ensure that firms continue to innovate.