Policy levers to boost innovation and productivity in South African manufacturing firms

Abstract

This policy brief shares key evidence-based insights on boosting innovation and productivity in manufacturing firms. Current policy instruments to promote innovation do not consider all of the drivers of innovation investment and success, and there is a need for a mix of tools ??? known as policy levers ??? that explicitly consider the differential impact of these drivers on product versus process innovation. New empirical evidence shows that both product and process innovations improve productivity. Firms that export are more likely to implement product innovations and larger firms are more likely to be process innovators. The analysis and recommendations presented here open up potential new directions for policymakers across industrial, economic and innovation spheres. To augment R&D tax incentives and other forms of subsidy, as well as skills development, the evidence points to the need to promote knowledge flows and competition, and support smaller firms in their innovation efforts.