INNOVATION CAPABILITY AND ADOPTION OF INNOVATION IN NAMIBIA’S ROAD FREIGHT TRANSPORT INDUSTRY by Anna Tusiloshenda Kangombe Dissertation presented for the degree of Doctor of Philosophy in the Faculty of Economics and Management Sciences at Stellenbosch University Promoter: Dr Firoz Khan March 2017 Stellenbosch University https://scholar.sun.ac.za DECLARATION By submitting this thesis electronically, I declare that the entirety of the work contained therein is my own, original work, that I am the sole author thereof (save to the extent explicitly otherwise stated), that reproduction and publication thereof by Stellenbosch University will not infringe any third party rights and that I have not previously in its entirety or in part submitted it for obtaining any qualification. March 2017 Copyright © 2017 Stellenbosch University All rights reserved i Stellenbosch University https://scholar.sun.ac.za ABSTRACT Freight transport costs and prices in Namibia are among the highest in the Southern African Development Community (SADC) region. Yet, the country’s road transport development agenda is premised on infrastructure development with limited knowledge on the ability of road freight transport firms to utilize that capacity and competitively support economic transformation activities. While innovation is arguably a pillar of competitiveness and growth for countries and firms around the world, research has not attracted required attention on innovation capacity of firms in Namibia, including in priority development sectors such as transport and logistics. This study, which applied empirical mixed method survey design, combines a non-linear inputs of innovation capability model with the probit model of Diffusion of Innovation (DoI) theory to assess road freight transport firms’ ability to innovate in a low skilled, less regulated industry of a small developing economy. The findings of the research submits that overall, Namibia’s road freight transport firms have capacity to provide efficient transport services to the economy, but rewards and attitudes towards novelty are lower. With the exception of micro enterprises, size and age of firms do not significantly affect innovation behaviour as per theoretical predictions because in Namibia’s road freight transport industry, most SMEs are owned and or managed by experienced former employees of larger firms. In spite of high levels of innovation capability observed among firms, the idiosyncratic ability of some constructs appear to have eroded into mainstream competencies as the study distinctively identified intra-organizational learning as the only construct highly associated with firm performance. The manifestation of poor reward systems on employees’ willingness to share knowledge and participate in creative innovative activities was also observed as a critical, yet ignored organizational detail. In adopting technological innovations, the results found that senior managers, especially in the early phases of the adoption process, follow a ‘political man’ syndrome where ideas from the floor are overlooked causing a disconnect between adoption and actual utilization of innovation in service provision. For firms, the solution for moving away from merely ‘enabling’ employees to meaningfully ‘engaging’ them in the innovation process lies in the promotion of psychological and job related employee well-being. This is especially important because, despite high levels of intra- organizational learning (a construct that is strongly associated with firm performance), ii Stellenbosch University https://scholar.sun.ac.za innovation capability in the industry has not strongly translated into efficient transport services, hence the country’s high transport prices. At policy level, this study recommends the introduction of protective compensatory measures accompanied by industry-specific incentives, which are currently lacking. The similarity of innovative behavioural traits between large, medium and small firms in the industry also calls for inclusive development support programs that are appreciative of micro size enterprises’ limited innovative capacity. By combining innovation capability and adoption of innovation based theories, this study pioneered a comprehensive application of firm-level innovation capacity assessment in Namibia. The new praxis aggregates innovation results and introduces an innovation results spectrum which comprises a firm’s generation capabilities (human factor), absorption abilities (technology factor), actual utilization (socio integrative effect) and firm performance (bottom line). In applying this approach, this study underscores the missing link between employees, capital and state in the provision of efficient road freight transport services and firm growth in Namibia. iii Stellenbosch University https://scholar.sun.ac.za OPSOMMING Vragvervoerkoste en -pryse in Namibië is van die hoogste in die Suider-Afrikaanse Ontwikkelingsgemeenskap-streek (SAOG). Tog berus die land se padvervoerontwikkelingsagenda op infrastruktuurontwikkeling met beperkte kennis oor die vermoë van padvragvervoerfirmas om hierdie kapasiteit te benut en aktiwiteite vir ekonomiese transformasie mededingend te steun. Al is innovering stellig ’n steunpilaar van mededingendheid en groei vir lande en firmas regoor die wêreld, het navorsing nie die nodige aandag op die innoveringskapasiteit van firmas in Namibië gefokus nie, insluitende in voorkeurontwikkelingsektore soos vervoer en logistiek. Hierdie studie, wat empiriese opnames toegepas het, kombineer ’n nie-liniêre-insette-van-innovering-vermoë-model met die probitmodel van Diffusie-van-Innovering-teorie (Diffusion of Innovation of DoI) om padvragvervoerfirmas se vermoë om in ’n lae geskoolde, minder gereguleerde bedryf van ’n klein ontwikkelende ekonomie te innoveer. Die bevindings van die navorsing stel dit dat, in geheel, Namibië se padvragvervoerfirmas die kapasiteit het om doeltreffende vervoerdienste aan die ekonomie te voorsien, maar belonings vir en houdings teenoor nuutheid is laer. Met die uitsondering van mikro-ondernemings, beïnvloed grootte en ouderdom van firmas, soos per teoretiese voorspellings nie, nie innoveringsgedrag beduidend nie, want in Namibië se padvragvervoerbedryf is die meeste KMO’s in besit van of onder die bestuur van ervare voormalige werknemers van groter firmas. Ten spyte van hoë vlakke van innoveringsvermoë waargeneem onder firmas, het dit geblyk dat die idiosinkratiese vermoë van sommige konstruksies na hoofstroomvaardighede geërodeer het, aangesien die studie intra-organisasie-leer kenmerkend geïdentifiseer het as die enigste konstruksie wat in ’n hoë mate met firmaprestasie geassosieer is. Die manifestering van swak beloningstelsels op werknemers se gewilligheid om kennis te deel en aan kreatiewe innoverende aktiwiteite deel te neem is ook waargeneem as ’n kritieke, maar geïgnoreerde organisasiedetail. By die aanneem van tegnologiese innoverings het die resultate getoon dat senior bestuurders, veral in die vroeë fases van die aannameproses, ’n ‘politikus’-sindroom navolg, en dat idees vanaf die gewone werkers oorsien word, wat ’n skeiding tussen aanname en werklike benutting van innovering in diensvoorsiening veroorsaak. Vir firmas lê die oplossing om weg te beweeg daarvan om werknemers bloot ‘toe te rus’ na sinvolle ‘gesprekvoering’ met hulle oor die innoveringsproses daarin om sielkundige en werkverwante werknemerwelsyn te bevorder. Dit is veral belangrik, want, ten spyte van hoë iv Stellenbosch University https://scholar.sun.ac.za vlakke van intra-organisasieleer (’n konstruksie wat sterk geassosieer word met firmaprestasie), word innoveringsvermoë in die bedryf nie sterk oorgedra na doeltreffende vervoerdienste nie, wat lei tot die land se hoë vervoerpryse. Op die beleidsvlak is die aanbeveling van hierdie studie die bekendstelling van beskermende kompenseermaatreëls, in samehang met industriespesifieke insentiewe, wat tans ontbreek. Die gelyksoortigheid van innoverende gedragseienskappe tussen groot, medium- en klein firmas in die bedryf doen ook ’n beroep vir inklusieweontwikkeling-steunprogramme wat waardering toon vir mikrogrootte-ondernemings se beperkte innoveringskapasiteit. Deur ’n kombinasie van innoveringsvermoë en die aanname van innoveringsgebaseerde modelle, het hierdie studie die weg gebaan vir ’n uiteenlopende assessering van innoveringskapasiteit op firma-vlak in Namibië. In spesifieke terme wys die studie die vermiste skakel tussen kapitaal, werknemers en staat in die voorsiening van doeltreffende vervoerdienste en firma-groei uit. v Stellenbosch University https://scholar.sun.ac.za DEDICATION This work is dedicated to Fransiska Ndiitela nkelo Kangombe. Ondapandula nkelo. vi Stellenbosch University https://scholar.sun.ac.za ACKNOWLEDGEMENTS I would like to express my profound gratitude and appreciation to the following people who made this learning journey possible. Dr Firoz Khan, my promoter, for critically reading every single draft and unconventionally challenging me with every submission. Ms. Christine Steenkamp, Operations Coordinator at the Namibia Logistics Association, and Mr John Dias, Secretary General at the Namibia Transporters Association, for their industry support throughout the process. To the members of the Namibia Logistics Association and the Namibia Transporters Association, for making time to participate in the study. Special thanks to the first four respondents to the survey questionnaire: Mr Manns of Eden International, Mr Pronk of Wesbank Transport, Mr Kleinhans of AAA Trucking, and Mr Uys of FP du Toit Transport, for giving me hope that this study can be done. To the Walvis Bay Corridor Group, Namibian-German Centre for Logistics, Namibia Statistics Agency and the Ministry of Trade and Industry (MITSMED) for their guidance during the early exploratory stage of this study. To my family and friends for their unconditional love, support and relentless encouragement. To the Graduate School of Economics and Management Sciences (GEMS), Dr Jaco Franken and Prof Martin Kidd - at the Statistics department - for their generosity and support. To my fellow Graduate School of Economics and Management Sciences PhD candidates, for their priceless encouragement and feedback through our weekly seminars. To Tutaleni I Asino and BFS for keeping me sane. vii Stellenbosch University https://scholar.sun.ac.za TABLE OF CONTENTS DECLARATION ........................................................................................................................ i ABSTRACT ............................................................................................................................... ii OPSOMMING .......................................................................................................................... iv DEDICATION .......................................................................................................................... vi ACKNOWLEDGEMENTS ..................................................................................................... vii TABLE OF CONTENTS ....................................................................................................... viii LIST OF TABLES ................................................................................................................... xv LIST OF FIGURES ............................................................................................................... xvii LIST OF ABBREVIATIONS .............................................................................................. xviii 1 CHAPTER ONE: INTRODUCTION ................................................................................ 1 Background to the Study ............................................................................................. 1 Namibia’s Road Freight Transport and Economic Development ............................... 2 Namibia’s Road Freight Transport Infrastructure and Services.................................. 3 Research Problem ........................................................................................................ 5 Research Aims and Objectives .................................................................................... 7 Theoretical Perspectives and Research Design ........................................................... 8 1.6.1 Innovation Capability Theories............................................................................ 9 1.6.2 Adoption of Innovation Theory ........................................................................... 9 1.6.3 Empirical Research Design and Method............................................................ 11 Conceptualization of Innovation ............................................................................... 12 1.7.1 Defining Innovation ........................................................................................... 12 1.7.2 Innovation Typologies ....................................................................................... 13 1.7.3 Characteristics of Innovation ............................................................................. 14 Innovation and Competitiveness in Firms ................................................................. 14 1.8.1 Innovation as a Competitive Factor ................................................................... 14 viii Stellenbosch University https://scholar.sun.ac.za 1.8.2 Firm Type and Innovation ................................................................................. 15 1.8.3 Creating Innovation in Firms ............................................................................. 16 1.8.4 Adopting Innovation in Firms ............................................................................ 16 Innovation, Competitiveness and Namibia’s Road Freight Transport Industry........ 18 Organization of the Study ......................................................................................... 19 2 CHAPTER TWO: OVERVIEW OF THE ROAD FREIGHT TRANSPORT INDUSTRY IN THE ECONOMY ............................................................................................................... 22 Introduction ............................................................................................................... 22 The Role of Road Freight Transport Services in the Economy ................................ 22 Drivers of Innovation in the Freight Transport Industry: Towards Innovation ........ 24 2.3.1 Shifts in Global Production Systems and Trade Liberalization ......................... 24 2.3.2 Rules of Origin and Trade Policy Instruments .................................................. 25 2.3.3 Increased Externalities ....................................................................................... 28 2.3.4 Short Product Life Cycles and Reliability Concerns ......................................... 32 Sustainable Road Freight Transport and the Effects of Industry Regulations .......... 33 2.4.1 Freight Sharing Schemes and Queuing Systems ............................................... 35 2.4.2 Third Country Rule and Cabotage ..................................................................... 36 Summary of the Chapter ........................................................................................... 36 3 CHAPTER THREE: INNOVATION IN THE ROAD FREIGHT TRANSPORT INDUSTRY ............................................................................................................................. 37 Introduction ............................................................................................................... 37 Structure of the Road Freight Transport Industry in Africa ...................................... 37 Innovation Capability of Road Freight Transport Firms ........................................... 38 3.3.1 Learning and Skills Development ...................................................................... 39 3.3.1.1 Skills and Careers in the Road Freight Transport....................................... 39 3.3.1.2 Truck Drivers and Spaces of Vulnerability ................................................ 40 3.3.1.3 Other Sources of Learning and Resource Allocation ................................. 41 ix