M.Comm. / South Africa's demand for electricity is expected to outstrip the industry's generation capacity by 2010. If the government wants to avoid this situation, the construction of new plants must commence. At the moment this task has been delayed because the Government is at loggerheads with COSAU and Eskom about restructuring the electricity supply industry. This debate will remain unsolved unless the government can substantiate why exposing the industry to competition will improve its performance. Unfortunately this task is not as simple as it seems. Even though competition is one of the most widely used terms in economics, it still remains an elusive concept. The ambiguity regarding tl1e meaning of competition arises from the failure to divorce the concept of competition from a market structure; as a consequence an operational meaning of what it means to compete \n terms of contemporary business behaviour does not exist. As a result activities associated with industrialisation, such as a changing production function, the development of new products and t~chniqu'::s and business structures are not related to the concept of competition. In order to develop n clear understanding of "what it means to compete", this dissertadon uses a behavioural definition of competition to determine why exposing firms to. competitive pressure improves their performance, reflected in superior static and dynamic efficiency levels. Based on this conceptual framework, Schumpeter' s approach to competition, which emphasises innovation, profits and the entrepreneur as the agent of improvement combined with the idea that it is the uneven development of knowledge that matters in the process of creative destruction", is accepted (Metcalfe & Ramlogan &Uyarra: 2001). Based on the above notion of competition, competitive pressure positively influences firms' performance, improving their static and dynamic efficiency levels. A micro-economic analysis of a C!)IDp.etitive electricity industry is conducted in order to test the abov~ assumption. This case study demonstrates that the competitive process ultimately improves thr: integration of knowledge throughout the supply chain, which is used an input to stimulate innovation within firms and exploit new technologies (Murphy, 2002:21). As a result, firms facing competition will try to retaii1 their market position 2 by exploiting all knowledge and exploring all avenues of technological invention, before selecting the best method (Khan: 1998). In addition, this case study illustrates that stimulating dynamic efficiency goes beyond developing and implementing "hardware" (computers, CCGT plants, fuel cells etc). Although technology plays an important role in shaping industrial organisation, it is not the catalyst that drives innovation and change. Rather organisational innovation changes market participants' schemas, breeding new ideas that become the input to create technology. Therefore organisational innovation has profound efficiency consequences (Williamson, 1994: 183). If technological and organisational inncvation is intertwined, then innovation is a complex evolutionary process, which occurs over time. Furthermore innovation cannot occur in a vacuum, but is interconnected, interwoven and interdependent with an industry's physical and institutional context (Perez, 2000). Based on the stylised facts a competitive market provides the institutional context that stimulates innovation, and therefore it might be worth incurring the transactions costs and short-term losses in order to create these opportunities.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uj/uj:1945 |
| Date | 24 January 2012 |
| Source Sets | South African National ETD Portal |
| Detected Language | English |
| Type | Thesis |
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