Untangling the web of uncertainty and innovation: a two country study

This study uses data from two countries, South Africa and Australia, to assess the effects of environmental uncertainty on the likelihood that firms will introduce different types of innovations. While this relationship is soundly established in the literature, our contribution is threefold. First, we develop an index of objective uncertainty to be contrasted with perceived uncertainty to understand their individual and combined effect on innovation. Second, we limit common source bias by using data from different sources. Third, we use different forms of innovation as dependent variables to provide a more nuanced understanding of the differential effects of uncertainty on different types of innovation such as process, product or new to the industry innovation. The findings support our assertion that objective and perceived uncertainties differ in how it affects innovation. It also illustrates how different types of innovation are nurtured by diverse forms of uncertainty. Interestingly, the effect of perceived uncertainty on most types of innovation is fully mediated by objective uncertainty, and partially mediated for commercialisation. This leads us to conclude that innovation studies should move beyond their use of perceived uncertainty alone to also include an objective measure to fully comprehend this relationship.