Modes of innovation used by SMMEs to tackle social challenges in South Africa

Innovation has become critical for many countries in the Global South, particularly in responding to challenges such as slow economic growth, primary commodity dependence, and socio-economic inequalities. Since 1996, the National System of Innovation (NSI) approach has been adopted by policymakers in South Africa in order to address these concerns. There are two distinct and complementary modes of innovation: (1) Science, Technology and Innovation (STI), which focuses on the promotion and commercialization of research and development (R&D); and (2) Doing, Using and Interacting (DUI), which involves business strategies, knowledge sharing among employees, and interactive learning between users and producers. In this article, we analyze the modes of innovation used by small, medium, and micro-sized enterprises (SMMEs) in South Africa, and identify their potential to use business model innovation to help tackle social challenges. Based on a Latent Class Analysis of online survey data collected from SMMEs in the Gauteng Province, we found that 82% used the DUI mode, 18% used the STI mode, and 72% expressed confidence that their innovative solutions could help tackle social challenges. We therefore recommend that policymakers further incentivize the STI mode within SMMEs, in order to more effectively address social inclusion problems in South Africa.