Innovation management practices as a factor leading to the failure of small and medium-sized enterprises in South Africa.

Abstract

The purpose of this study was to investigate the factors that lead small and medium enterprises (SMEs) to failure in South Africa. Even though, small businesses can be major drivers of economic development, job creation, and innovation in South Africa, the level of failure of small businesses is extremely high. Based on this background, the aim of this study was to determine the innovation factors and managerial practices that lead to the failure of small and medium-sized enterprises and how they can be addressed in order to understand the causes of the failure of SMEs and to improve their survival rate in South Africa. In this study secondary data has been gathered from peer-reviewed and grey literature (such as online sources, and government reports). The data analysis for this research focussed on relevant literature that addresses the impacts of innovation on small businesses and the factors that can cause their failure. The PRISMA method was used in the research as a base for the systematic review of data collected. The findings revealed that the success and growth of small and medium enterprises in South Africa largely depends on the human capital of their owner/manager. The cause of small business failure has been mainly the lack of knowledge, lack of funding, and general lack of business decision-making skills. In addition, the findings also revealed a lack of financial literacy, underqualified employees or managers, and high competition. The study recommends that small business owners should ensure that the managers or the employees have the required basic skills and knowledge on how to run and manage the business. Furthermore, with the current development in the technological industry, small business owners must ensure that they keep up with the fast-evolving industries and competition. The contribution of this study is that it provides small business owners and managers with technical recommendations, which if applied, could result in small businesses’ success in their respective industries. Lastly, it provides insight into the impact of innovation on small businesses sustainability in developing countries and the causes of the failure of SMEs.