IS COMPETITION GOOD FOR INNOVATION?

> Mihe Gaomab II

In the era of policy implementation in Namibia, varied policy issues require an understanding of the relation between competition and innovation.

Conceptually, the question exists whether one should foster competition that is good for innovation and so far it is proven very hard to ascertain theoretically and empirically.

First, does more competition lead to more innovation?

Economists have long been interested in the relationship between competition and innovation, but economic theory seems to be contradicted by the empirical evidence.

Theories of industrial policy typically predict that innovation should decline with competition.

This is based on the notion of an Economic theory that increased competition generates substantial market power that generally threatens innovation by lowering the return or resources available for research and development to innovative efforts.

But there is also increasingly a view that in an environment of competition intensity and concentrated markets, competition generally promotes innovation.

In fact, substantial empirical work finds that it not only increases innovative activity but in truth, competition has proven to boost innovation.

Competition involves the rivalry of firms to offer to the market better goods and services.

The only way they can do it is through creating new ideas and thoughts that offers new tangible products and services.

Competition is known to be fierce in innovative sectors where “winner-takes-all” scenarios of monopolistic competition prevail.

In many cases, competition in such sectors could be better understood in terms of dynamic competition, i.e., competition for the market rather than competition within the market.

Hence firms which are able to anticipate proactively increased creativity on introducing new products and services, thus enhancing innovation with increased competition in the market has shown that it actually makes competition good for innovation in a market, unlike where competition ends up gobbling or devouring existing firms, products, and services within the market.

Such innovative competition thus enhances entrepreneurial activity which consistently identifies new creative ways of things or new ideas that respond to a gap in a market and innovation thrives by renewed competitive enterprising culture, vigour, determination and dynamism of an economy.

Secondly, since competition is proven as the mother of innovation, is more innovation desirable for any economy since its proven that competition fosters the marketplace of ideas.

In Africa and in Namibia in particular, this second point is often taken for granted.

Innovation is seen as insignificant towards the economic potential of Africa.

But it is the key where the future growth demands lie in the global order. It is undeniable that without having a conscious innovative economic strategy, any economy will perish for the future.

The Asian economies have shown that their conscious effort to mimic and even surpass the innovative technology of the Western world has assisted those economies to be innovative, competitive and resilient globally such as Singapore, Malaysia, South Korea, India and China in areas of micro-financing, consumer durable and non-durable goods, manufactured and electronic goods.

It is also proven empirically that the growth of innovation is hugely depended on small businesses development (SMEs) as entrepreneurs, as drivers of small businesses, are the innovators of the economy.

The importance of innovation in entrepreneurship can be seen in the invention of new ways to produce products or improved solutions.

A service industry can expand with new or improved types of services to fulfill the ever changing needs of their clients.

Manufacturers can come up with new products from raw materials and by-products.

Increasingly the Youth is using technological advances to come up with new ideas to respond to demands not attended to in the past.

Innovation usually begins with a creative need where small businesses are generally directly involved in their marketplace and they know exactly what the consumers, business, stakeholders and communities need and strive to come up with solutions to fulfill those needs.

They seize the opportunity to innovate to ease everyday problems and thus keeping abreast with current trends and demands is an important factor for entrepreneurs to fuel their creativity and innovation.

But the question begs do businesses in Africa and in Namibia constantly innovate by doing exactly that.

While big businesses such as Pupkewitz, Olthaver and List, Frans Indongo Enterprise, Stimulus /Point Break Inc, and Trustco Holdings may command many of the headlines, small businesses are really the engine that drives much of our economy.

The adage “small businesses are the backbone of our economy” stands true in modern-day economies. Although many small businesses may depend on outsourcing by larger companies, if they did not exist, so wouldn’t the big businesses.

SMEs also help circulate money in the economy quickly and they work at the micro-level of economics hence fuelling innovative competition and create a base for the macro-economic foundation.

Small businesses in Namibia and Africa in general should make innovation fundamental and entrepreneurs must not see just one solution to a need but come up with ideas for multiple solutions thus ensured a knowledge driven economy.

Innovation in entrepreneurship is without doubt a significant factor in fuelling the economy.

By embracing innovation to keep up with the pace of change in the dynamic world of business, entrepreneurs are surging steadily forward with a wealth of creative and innovative ideas that transform into competitive products and services, allowing entrepreneurs and their small businesses to garner financial gains that, in turn, help boost the country’s economy.

This shows that Innovation is regarded as an “engine for economic growth” and growth is regarded as desirable for any economy.

Is Namibia on the right track!

Innovation is pursued in Namibia through Namibian Standards Institute (NSI) by effecting standardization, safety and quality of goods and services, by the National Commission on Research Science and Technology (NCRST) through innovating research ideas and creation of intellectual capital as well as the Business Intellectual Property Authority (BIPA) by registering and managing pool of intellectual property in Namibia.

The Competition Commission does have provisions in the Competition Act that regulates innovation by exemption the intellectual property rights either by merger regulation and or anti-competitive practice.

The Ministries of Industrialization, Trade and SME Development, ICT and Higher Education treat competition and innovation at the core at which a policy thrusts on innovation competition is pursued either as a method or process of the industrial process, economic product, commercial or educational service or technological business development.

The only drawback is that this process of innovation seems uncoordinated to develop the best innovators in the country.

Namibia needs to develop a coordinated innovative strategy to develop entrepreneurs that would foster innovation in Namibia.

It is encouraging to see young and upcoming entrepreneurs such as Amushe INC, Justina Beauty Exclusive CC, Twapewa Kadhikwa Xwama Restauranter,  /Arobasen Consulting, AMAE Investments, Amusha Consulting, Leadership Magazine, Confidente Inc, Young Designers Advertising and Tuli Sheya who develop a SMS technology payment platform.

The Namibian Organizations such as the Namibia Business Innovation Centre (NBIC), SME Compete, E-Bank, Business Financial Solutions (BFS), Team Namibia, NCCI, Namibia Manufacturers Association and SME Bank and Junior Achievement Namibia (JAN) must be commended for the sterling contributions they make to effecting innovation in Namibia respectively around business innovation and SME financing in especially areas of youth entrepreneurship.

It is proven empirically and theoretically that where competition thrives, innovation flourishes.

Hence it is of paramount importance that innovation is nurtured in Namibia and by extension to Africa through a strong, vibrant and dynamic entrepreneurial activity and enterprising culture as competition is good for innovation.

• Mihe Gaomab II is the Chief Executive Officer of the Namibian Competition Commission.

November 2015
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