Increasing competitive advantage through upgrading : the automotive component manufacturing industry in South Africa

Abstract

The research project investigates whether automotive component manufacturers located in South Africa are taking advantage of their participation in global value chains to functionally upgrade. Two factors, namely position in the value chain and global connectedness are assessed in terms of their effect on the propensity for firms to innovate and upgrade. Continuous pressure from value chain leaders to reduce costs coupled with increasing competition from other low-cost, developing economies means that South African automotive component manufacturers have to upgrade to improve their competitiveness and maintain their positions in the global value chain. This quantitative study analysed data collected through interviews from 76 companies in the National Association of Automotive Component and Allied Manufacturer‟s database of firms. The results support previous literature and demonstrate that indigenous innovation does occur under certain conditions. Whilst participation in global value chains seems to stimulate innovation, it does not necessarily guarantee that innovation will occur nor does it mean that innovation will automatically result in upgrading. Questions that require further investigation include among others the upgrading trajectory firms over time and a deeper understanding of the mechanisms used by innovation leaders to absorb and deploy the knowledge and technology obtained from global interactions. Copyright