A Stellenbosch Case Study
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The location dynamics of knowledge-based service establishments: A Stellenbosch case study by Maria Anita Adendorff Submitted in partial fulfilment for the degree MA Geography and Environmental Studies at Stellenbosch University Geology, Geography and Environmental Studies Faculty of Arts Supervisor: Prof. S.E. Donaldson Date: March 2009 Declaration I, the undersigned, hereby declare that the work contained in this thesis is my own original work and that I have not previously in its entirety or in part, submitted it at any university for a degree. ______________________ (Signature) Maria Anita Adendorff ______________________ Name in full 18/02/2009 ______________________ Date Copyright © 2008 Stellenbosch University All rights reserved ii Acknowledgements The financial assistance of both the National Research Foundation (NRF) as well as the South Africa-Netherlands Research Programme on Alternatives in Development (SANPAD) towards this research is hereby acknowledged. Opinions expressed and conclusions arrived at, are those of the author and are not necessarily to be attributed to the NRF or SANPAD. I would also like to acknowledge and thank the following people: • All staff members at the Department of Geology, Geography and Environmental Studies, for their continued support, advice, assistance, encouragement and kindness. • My parents, for allowing me to intrude on their retirement over the past few years and for so patiently and lovingly supporting the ‘mature student’. • Professor Ronnie Donaldson, my supervisor, who has given me the combination of support, encouragement and freedom necessary to make way on my path to becoming a creative and critical academic thinker. • All the service sector employees who took time out of their busy schedules to kindly assist me in my research. • My fellow postgraduate partners in pain and great friends – Leigh, Garth and Jaco. Thanks for the crosswords, shared lunch times, b-blogging, running, random chitchat and constructive criticism. • To each of my friends and family for their continuous interest and emotional support, and for providing the necessary escapism. • Above all, my true and living God - without whom I am nothing - for enriching my life with all the wonderful people on this list, for every ability and opportunity, and for the knowledge that I will have a steady compass to guide me through whatever lies ahead. iii Abstract Issues relating to globalization and the rise of the New Economy have received much attention from academics. Renewed emphasis has been placed on the importance of locality and cities are seen as gateways to ensuring a competitive role in the global economy. In South Africa, local economic development (LED) approaches are increasingly reflecting market-driven entrepreneurialism as cities compete to attract investment. This has, however, caused the decline of economies of already lagging regions, widening regional disparities. Statistical evidence confirms the opinion that the service sector has become a leading contributor to national and regional economic growth, both internationally and in South Africa. Synonymous with the knowledge-based economy is the dependence of this sector on innovation and highly skilled human capital as drivers of competitiveness and development. As a result, the role of universities as producers of knowledge and educated labour has received much attention. The perceived geographic “footloose” nature of knowledge-based industries has also led some to believe in their potential to reduce the disparities between cities and small towns or peripheral locations. Evidence show, however, that knowledge-based service industries still tend to cluster in major metropolitan areas. Though the importance of the knowledge-based service sector has been acknowledged by academics and government, a lack of empirical research still exist on the decision-making processes determining the choice of location of South African companies. Research has indicated the medium-sized town of Stellenbosch in South Africa to have a high level of growth potential. The town is also the location of a well-established IT and knowledge- based service sector. For the purpose of this study, a database was compiled of a research population of 329 knowledge-based service industries operational in Stellenbosch, after which surveys were distributed amongst the entire population. Data generated from 104 completed questionnaires provided a deepened understanding of the nature of these industries of which the majority is single-branch businesses situated in Stellenbosch due to the fact that it was the owners or key role players’ home town during the time of establishment. Other notable trends such as the growth in the number of international head offices in the knowledge-based service sector, the availability of highly skilled labour, and proximity to important clients, further highlights the reasoning behind the decision of knowledge-based companies to locate in Stellenbosch specifically. Finally, the existing linkages between Stellenbosch University and these industries - specifically the IT and engineering sector - receives attention. iv Opsomming Vraagstukke wat verband hou met globalisering en die ontwikkeling van die Nuwe Ekonomie het reeds heelwat aandag van akademici ontvang. Hernude klem is geplaas op die belangrikheid van ligging, en stede word gesien as instrumenteel in die proses om ‘n mededingende rol in die globale ekonomie te verseker. As gevolg van stedelike mededinging met die doel om investering te lok, reflekteer plaaslike ekonomiese ontwikkeling (PEO) in Suid-Afrika toenemend markgedrewe entrepreneurskap. Dit lei egter tot die ekonomiese agteruitgang van areas wat reeds ‘n agterstand beleef, met die gevolg dat streeksongelykhede verder vergroot. Statistiese bewyse bevestig die siening dat die dienssektor ‘n vername bydraer tot streeks- en nasionale ekonomiese groei geword het, beide op internasionale vlak en in Suid-Afrika. Sinoniem met die kennisgebaseerde ekonomie is hierdie sektor se afhanklikheid van innovasie en hoogs opgeleide menslike kapitaal as dryfkrag vir mededinging en ontwikkeling. Die rol van universiteite as skeppers van kennis en voorsieners van ‘n opgeleide werksmag het dus al aandag geniet. Sommige is van mening dat die oënskynlike geografiese “ongebondenheid” van kennisgebaseerde industrieë hulle die potensiaal gee om ongelykhede tussen stede en klein dorpe of randareas te verminder. Daar is egter bewys dat kennisgebaseerde industrieë steeds geneig is om in hoofmetropolitaanse gebiede te konsentreer. Hoewel akademici en die regering die belangrikheid van die kennisgebaseerde dienssektor erken, bestaan daar steeds ‘n gebrek aan empiriese navorsing rakende die besluitnemingsprosesse wat die keuse van ligging van Suid- Afrikaanse maatskappye bepaal. Navorsing het getoon dat die medium-grootte dorp van Stellenbosch in Suid Afrika oor ’n hoë vlak van groeipotensiaal beskik. Die dorp word ook gekenmerk deur ’n goedgevestigde IT- en kennisgebaseerde dienssektor. Vir die doel van hierdie studie is ’n databasis saamgestel bestaande uit ’n navorsingspopulasie van 329 kennisgebaseerde diensindustrieë werksaam in Stellenbosch, waarna vraelyste onder die hele populasie versprei is. Data wat uit 104 voltooide vraelyste gegenereer is, het gelei tot dieper begrip van die aard van hierdie industrieë, waarvan die meerderheid enkel-tak besighede in Stellenbosch is, voortspruitend uit die feit dat dit die eienaars of hoofrolspelers se tuisdorp was tydens die vestiging van die besighede. Ander noemenswaardige neigings, soos die toename in die aantal internasionale hoofkantore in die kennisgebaseerde dienssektor, die beskikbaarheid van hoogsgeskoolde arbeid, en die nabyheid aan belangrike kliënte, werp verder lig op die besluit van kennisgebaseerde besighede om spesifiek in Stellenbosch te vestig. Laastens, word die v bestaande verhoudinge tussen die Universiteit van Stellenbosch en hierdie industrieë – in besonder die IT- en ingenieurssektore – bestudeer. vi Contents Declaration............................................................................................................................. ii Acknowledgements................................................................................................................ iii Abstract.................................................................................................................................. iv Opsomming............................................................................................................................ v Contents................................................................................................................................. vii Tables..................................................................................................................................... xiii Figures................................................................................................................................... xv Appendices............................................................................................................................. xvi Acronyms............................................................................................................................... xvii CHAPTER 1: INTRODUCTION............................................................................. 1 1.1 SETTING THE SCENE............................................................................................ 1 1.2 PROBLEM FORMULATION.................................................................................