Abstract
Support for technology based start-ups, often termed new technology based firms, (NTBs), initially seen solely as a concern for developed countries, is currently spreading very rapidly in developing countries. Institutions that support the development of the capacities of start-ups to innovate by providing funding are now widely accepted as integral to the National Systems of Innovation (NSI). The main focus of the chapter is an examination of one possible institutional form for the support for start-ups: namely support provided directly by a governmental agency. The paper draws largely from the “lived experience” of one such institution—namely the Technology Innovation Agency (TIA) in South Africa—in order to highlight some of the challenges and constraints that developing countries are likely to face in attempting to develop start-ups by providing funding and support for innovation to such firms through the mechanism of a government agency.
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Notes
- 1.
This section draws on a recent World Bank publication, Grover et al. (2019), Chap. “The Readiness of Innovation Systems for the Fourth Industrial Revolution (4IR) in Sub-Saharan Africa”.
This study utilises longitudinal data sets of company performance from Brazil, Côte d’Ivoire, Ethiopia, Hungary, India, Indonesia, Mexico, South Africa, Thailand, Tunisia, and Turkey.
- 2.
Half the firms that experienced a high-growth event in the previous three years are likely to exit the market altogether in the following 3–6 years; less than 15% are likely to repeat a high-growth episode, Grover et al. (2019).
- 3.
This section of the paper draws on Cirera and Maloney (2017).
- 4.
There has been a tendency for policy makers to identify best-practice institutions based in countries such as Israel, Singapore and Finland and then attempt to emulate them. While the experiences of these countries are valuable, their contexts are radically different: in the broader environment within which the firms operate, in the capacities, that firms have to innovate and, most importantly, in governmental capacities.
- 5.
Supports programmes are increasingly available and have spread to most African countries (Disrupt Africa 2017). These include even a number of the poorer and smaller countries. 159 African tech start-ups are said to have raised funding in excess of US$195 million in 2017. While this is still a small number, the rate of growth is impressive—a 51% increase on the previous year (Disrupt Africa 2017). The top three countries were South Africa, Nigeria and Kenya. Ghana and Egypt were also significant. In terms of sectors, finance received the most funding and e-commerce had the most significant growth (Disrupt Africa 2017).
- 6.
There is some evidence that government-owned funds are less effective in providing capital to start-up than are government-supported venture capital funds—the funds-of-funds approach. “There are significant differences between government ownership and government support of venture capital firms, broadly suggesting that support outperforms ownership” (Brander et al. 2010: 13). Interestingly, a modest amount of government support for a private fund may result in such a fund performing better than a private VC. Significant support has the opposite effect (Brander et al. 2010: 12).
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Kaplan, D. (2021). Challenges and Constraints for Government Agencies Supporting Firm Level Innovation: Some Reflections from South Africa. In: Daniels, C., Dosso, M., Amadi-Echendu, J. (eds) Entrepreneurship, Technology Commercialisation, and Innovation Policy in Africa. Springer, Cham. https://doi.org/10.1007/978-3-030-58240-1_12
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