Innovation Practices and Performance of Small and Medium Manufacturing Enterprises in Kenya

Abstract

In the global economy of the 21st century, competition is complex, challenging and fraught with competitive opportunities and threats. Innovation practices are increasingly becoming the main focus for entrepreneurs especially those in the manufacturing sector. Without effective innovation practices, the capability of a firm to achieve or sustain a competitive advantage is greatly constrained. Most SMMEs in Kenya post poor performance and majority of them do not celebrate their third birthday. Research on innovation practices and its dimensions may lead to improved performance especially for the manufacturing sector that is supposed to account for 20% of the GDP by the year 2030, as visualized in the Kenya vision2030. This study examines the influence of innovation practices on the performance of Small and Medium Manufacturing Enterprises (SMMEs) in Kenya. The objectives of the study were to determine how creativity, organizational structure, research and development and commercialization influence SMMEs performance. Entrepreneurial orientation moderated the relationship between innovation practices and SMMEs performance. This study would benefit the industry, SMMEs owner managers, financial institutions, researchers and the government. A representative sample of 254 managers or entrepreneur owner managers was selected from manufacturing firms registered under Kenya Association of Manufacturers using stratified random sampling. A self-administered, semi-structured questionnaire was used to collect the data. The questionnaire was pre-tested to ensure its validity and reliability. The study collected both qualitative and quantitative data. Qualitative data was analysed using content analysis while quantitative data was analysed by descriptive and inferential analysis. The regression analysis model was developed to establish the relationship between the dependent and the independent variables. Data was presented, from which inferences were made as well as the conclusion and recommendations. The study found that commercialization, organizational structure, Research and Development and creativity were all individually significant predictors of SMMEs performance. The results also revealed that entrepreneurial orientation significantly moderated the relationship between innovation practices and SMMEs performance. Overall, the study demonstrated positive relationship between innovation practices and SMMEs performance. This study recommends that factors associated with innovation practices need to be enhanced in SMMEs by including them in the vision and mission statements as they have the greatest impact on SMMEs performance. SMMEs should also be encouraged to increase their entrepreneurial intensity levels for superior performance.