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THE EFFECTS OF STRATEGIC INNOVATION ON THE PERFORMANCE OF
SMES IN NAIROBI COUNTY
BY
PAUL OWINO OSUGA
UNITED STATES INTERNATIONAL UNIVERSITY –AFRICA
SPRING 2016
THE EFFECTS OF STRATEGIC INNOVATION ON THE PERFORMANCE OF
SMES IN NAIROBI COUNTY
BY
PAUL OWINO OSUGA
A Research Project Report Submitted to the School of Business in Partial
Fulfillment of the Requirement for the Degree of Masters in Business
Administration (MBA)
UNITED STATES INTERNATIONAL UNIVERSITY –AFRICA
SPRING 2016
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STUDENT’SDECLARATION
I the undersigned, declare that this is my original research project and has not been
submitted to any other college, institution or university other than United States
International University - Africa for academic credit.
Signed:____________________________________
Date: ________________
Paul, Owino Osuga(ID 641583)
This research project has been presented for examination with my approval as the
appointed supervisor.
Signed:_____________________________________
Date:_________________
Dr. Juliana M. Namada
Signed:_____________________________________
Dean, Chandaria School of Business
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Date:_________________
COPYRIGHT
Copyright © 2016 Paul Owino Osuga. All texts, graphics or other works are
copyrighted works of Paul Owino Osuga. All rights reserved. No part of this report
may be reported or otherwise reproduced or transmitted in any form or by electronic or
mechanical means without prior permission or authority granted by theauthor
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ACKNOWLEDGEMENT
I wish to acknowledge and give special thanks Dr. Juliana M. Namada for her
guidance, patience and professionalism throughout my project, my parents, siblings and
fellow classmates for their support. I would like to thank the almighty God for his
support and providence during this study. My sincerest appreciation also goes to my
research lecturer Dr. Kiriri for his time and valuable skills shared that were crucial to
undertake theproject.
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DEDICATION
I would like to dedicate this project to my parents , Harriet Nadunga and Benjamin
Osuga, and my fellow classmates who have walked with me in the long journey for the
thirst for knowledge during the whole duration of my study at USIU – Africa, and
specially for their support and motivating me as I worked on myproject.
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ABSTRACT
The purpose of this study was to establish the effects of strategic innovation on the
performance of Small and Medium Enterprises in Nairobi County. The study assessed the
effects of Product innovation on performance; evaluated the effects of Process innovation
on performance; and examined the effects of market innovation on performance. The
underlying concepts of each research objectives were also examined.
The research methodology employed for the study was the descriptive research method.
The target was owners and employees of small and medium enterprises operating in
Nairobi County. The sample frame for the study was drawn from Small and medium
Enterprises operating within the Nairobi central district which was 534 SMEs. From this a
sample size of 138 SMEs was chosen using simple random sampling technique. To
facilitate the process of data collection, questionnaires which contained structured and
opened ended questions, were issued to the respondents and informal interviews were
also conducted so as to ensure data accuracy. The data collected was analyzed using
descriptive statistics with Statistical Package for Social science (SPSS) and Microsoft
Excel as tools of analysis. The data analysis involved tables, charts, frequency
distribution charts, percentages, regression analysis and standard deviations and the data
is presented inform of tables and figures.
The study established that there is a positive relationship between strategic innovation and
performance. There was a significantly strong relationship among the three variables of
the study. The study found that innovations of new products improved the performance of
the SMEs. As part of product innovation strategy, some companies and businesses have
incorporated employee motivation and reward for any product innovation idea they
develop. It was determined the organizations vision and mission played a critical role in
strategic innovation. Further it was established that SMEs have adopted several process
innovations in order to gain a competitive advantage.It was also established that some
businesses did business researches on the need of the customers and other engaged on
pricing strategies which substantially improved their overall performance.
The study concluded that in order to enhance performance and gain a competitive
advantage the SMEs had to undertake strategic innovation. It was also noted Resources
and a firms capabilities were also regarded as a key component for successful strategic
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innovation. It can be noted that the success of strategic innovation also depends of the
knowledge and leadership skills of the organizations management.
The study recommends management of SMEs align employee participation in their
product development strategies to ensure all staff members take part in product
development. Further it is proposed SMEs invest in new systems and processes such as
inventory management systems to benefit the advantages associated with such
technologies. In conclusion SMEs should embark on serious and strategic marketing with
different strategies which can enable them to outperform their competitors and maintain
their market share as well as their competitive edge.
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TABLE OF CONTENTS
COPYRIGHT .............................................................................................................. iv
ACKNOWLEDGEMENT ........................................................................................... v
DEDICATION............................................................................................................. vi
ABSTRACT ................................................................................................................vii
TABLE OF CONTENTS ........................................................................................... ix
LIST OF FIGURES .................................................................................................... xi
LIST OF TABLES .....................................................................................................xii
LIST OF ABBREVIATIONS ..................................................................................xiii
CHAPTER ONE .......................................................................................................... 1
1.0 INTRODUCTION.................................................................................................. 1
1.1 Background of the Study ......................................................................................... 1
1.2 Statement of the Problem ......................................................................................... 5
1.3 General Objective .................................................................................................... 6
1.4 Specific Objectives .................................................................................................. 6
1.5 Justification of the Study ......................................................................................... 6
1.6 Scope of the Study ................................................................................................... 7
1.7 Definition of Terms.................................................................................................. 8
1.8 Chapter Summary .................................................................................................... 9
CHAPTER TWO ....................................................................................................... 10
2.0 LITERATURE REVIEW ................................................................................... 10
2.1 Introduction ............................................................................................................ 10
2.2 Product Innovation and Performance..................................................................... 10
2.3 Process Innovation and Performance ..................................................................... 14
2.4 Market Innovation and Performance ..................................................................... 18
2.5 Chapter Summary .................................................................................................. 23
CHAPTER THREE ................................................................................................... 24
3.0 RESEARCH METHODOLOGY ....................................................................... 24
3.1 Introduction ............................................................................................................ 24
3.2 Research Design..................................................................................................... 24
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3.3 Population and Sampling Design ........................................................................... 24
3.4 Data Collection Methods ....................................................................................... 26
3.5 Research Procedures .............................................................................................. 27
3.6 Data Analysis Method............................................................................................ 27
3.7 Chapter summary ................................................................................................... 27
CHAPTER FOUR ...................................................................................................... 28
4.0 DATA ANALYSIS AND INTERPRETATION ................................................ 28
4.1 Introduction ............................................................................................................ 28
4.2 Demographic information ...................................................................................... 28
4.3 Product Innovation and Performance..................................................................... 34
4.4 Process Innovation and Performance ..................................................................... 37
4.5 Market Innovation and Performance ..................................................................... 39
4.6 Chapter Summary .................................................................................................. 42
CHAPTER FIVE ....................................................................................................... 43
5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ..................... 43
5.1 Introduction ............................................................................................................ 43
5.2 Summary of the Findings ....................................................................................... 43
5.3 Discussion of the Findings ..................................................................................... 44
5.4 Conclusions ............................................................................................................ 48
5.5 Recommendations .................................................................................................. 49
REFERENCES ........................................................................................................... 51
Appendix I: Cover Letter .......................................................................................... 62
Appendix II: Study Questionnaire ........................................................................... 63
Appendix III: List of SMES ...................................................................................... 68
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LIST OF FIGURES
Figure 4. 1: Gender of the respondents ..................................................................... 29
Figure 4. 2: Age bracket of the respondents ............................................................. 29
Figure 4. 3: Education level of the respondents ........................................................ 30
Figure 4. 4: Type of business .................................................................................... 31
Figure 4. 5: Type of the industry............................................................................... 31
Figure 4. 6: Level in the Business ............................................................................. 32
Figure 4. 7: Number of employees............................................................................ 33
Figure 4. 8: Age of business in years ........................................................................ 33
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LIST OF TABLES
Table 4. 1: Response rate .......................................................................................... 28
Table 4. 2: Performance of the SMEs ....................................................................... 34
Table 4. 3: Descriptive statistics - Product innovation and performance of SMEs .. 35
Table 4. 4: Model Summary- Product innovation and performance of SMEs ......... 36
Table 4. 5: ANOVA- Product innovation and performance of SMEs ...................... 36
Table 4. 6: Coefficient- Product innovation and performance of SMEs .................. 36
Table 4. 7: Descriptive statistics- Process innovation and performance of SMEs ... 37
Table 4. 8: Model Summary- Process innovation and performance of SMEs .......... 38
Table 4. 9: ANOVA- Process innovation and performance of SMEs ...................... 38
Table 4. 10: Coefficients- Process innovation and performance of SMEs ................ 39
Table 4. 11: Descriptive statistics- Market innovation and performance of SMEs ... 40
Table 4. 12: Model Summary- Market innovation and performance of SMEs ......... 41
Table 4. 13: ANOVA- Market innovation and performance of SMEs ...................... 41
Table 4. 14: Coefficients- Market innovation and performance of SMEs ................. 41
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LIST OF ABBREVIATIONS
CBD: Central Business District
GDP: Gross Domestic Product
JIT:
Just In Time Production
KSH: Kenya Shillings
SME: Small and Medium Enterprises
SPSS: Statistical Package for Social Science
QRM: Quick Responses Manufacturing
TQM: Total Quality Management
TPS: Toyota Production System
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CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the Study
In the current dynamic business environment, an organization needs to be capable of
constantly innovating in order to be successful. Innovation not only involves the
introduction of new products or changing the use of an existing product, introduction of
new processes but also changing the organization structure as well as the administrative
structure (Hult, Hurley &Knight, 2004). According to Silva (2012),the potential to
innovate varies from one organization to another and is dependent on a variety of factors.
This therefore means that an organization success is ultimately pegged to its
organizational capability which in essence entails continuously exploring of untapped
areas and implementation of new ideas to new products, services, processes and
organizational systems that in the long run impact positively on the stakeholders (Neely,
Adams and Kennerly, 2002).
It is evident that in today’s competitive environment the objective of each firm is to be
better than its rivals in terms of performance and ultimately create a competitive edge that
will lead to sustainability of the firm. The current environment thrives on innovation
which is driven by knowledge, employee creativity and the desire to constantly learn
research and develop new ideas and process (Bartes, 2013). According to Ramadani and
Gerguri (2011) innovation is a process that entails creation of new products, services, new
technological process, new organization or the enhancing of existing products or services,
enhancement of technological processes and the existing organization .
Firms employ various strategies in order to achieve their various goals and objectives .A
strategy is defined asa collection of decisions and actions that management incorporates
in their daily activities so as to achieve a superior performance as compared to the
players in the market(Parthasarthy, 2007).According to Porter an organization’s
performance is inversely related to the five competitive forces therefore it’s up to
management to assess the intensity of the competitive forces and either implements
defensive or offensive strategies (Ormanidhi and Stringa, 2008).
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Innovation is one of the strategies adopted by the various firms in different industries in
order to create a market niche for themselves. Companies innovate through adopting new
technologies and management practices that will yield efficiency and ultimately lead to
better performance (Johnson, Scholes and Whittington, 2011). Strategic innovation
therefore involves penetration into new markets, creation of value for customers and
redefining the existing markets through improving the value of products and services to
the customers (Gebauer, Worch and Truffer, 2012).Strategic innovation will also entail
radical changes made in the organizations model in order to stimulate value creation for
their customers and create a competitive advantage (Hamel, 2003).
At its simplest form Strategic innovation is the combination of strategy and innovation
however, Gebauer, Worch and Truffer (2012) perceive the term as penetration into new
markets, creation of value for customers and redefining the existing markets through
improving the value of products and services to the customers. Derrick and Soren (2007)
are in agreement and view Strategic innovation as responsible for strategy creation and
developing unique products or services and processes to help stimulate growth and create
new value for the organization.In essence Strategic innovation will be seen as one of the
core competencies for building a competitive advantage in the organization (Snyder and
Duarte, 2003).
Strategic innovation is critical for firms that are in pursuit of improved performance and
their reward is often an increase in their profits and their market share (Palmer and
Kaplan, 2007). According to Moeller et al (2006), the motivating factors that stimulate
strategic innovation in organizations is due to constant changes in demographics globally
that lead to a combination of three variables that are who, what and how that strategic
innovators need to consider. Innovation will relate to products, processes, markets and the
organization as a whole. This will entail new products, new processes of production, new
sources of supply, new markets and new ways in which the businesses carry out their
activities. The four different types of strategic innovations include production innovation,
process innovation, marketing innovation and organizational innovation (OECD 2005).
Companies find themselves competing not only on a local stage but also the global stage
which is characterized by turbulent market. The goal of these companies is to maximize
on the shareholders wealth and satisfy them while still looking all performance
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dimensions (Neely et al., 2002). There is therefore a need for a company to position its
strategies with the performance measurement systems (Dyson, 2000; McAdam and
Bailie, 2002). However there is a challenge in SMEs in continuously updating their
performance measurement to match the changes in the market due to lack of resources
and sufficient managerial expertise (Garengo et al., 2007).
In regards to performance measurement, SMEs use mainly accounting information and
financial measurement (Carpinetti et al., 2008). They often consider technical aspects and
production as a waste of time which would be used in other activities (Hong and Jeong,
2006). Jarvis et al (2000) also notes that most SMEs link their performance measures
with cash flows. In order to measure performance in SMEs studies show that having a
point of reference is idle and constantly making improvements will be a yard stick for
improving their performance (St-Pierre and Delisle, 2006).
The balance score has become an effective tool to measure performance since it
incorporates four key areas of performance; internal business processes, learning and
future growth, financial perspective and customer perspective (Kaplan and Norton, 1992).
Although this is a comprehensive tool SMEs have a challenge in terms of resources
therefore they rarely use it (McAdam, 2000). There is therefore need to adopt the Quick
Response Manufacturing (QRM) in place of the balance score card since its ideal for
SMEs and focuses on lead time reduction as a performance measure indicator. This will
help focus on efficiency and ultimately retain the customer while putting more efforts on
improvement of key areas (Hvolby and Thorstenson 2000).
Kenya like other countries across the globe the number of SMEs has been growing at a
tremendous rate. The number of registered SMEs in Kenya stands to over 1.6 million.
They have grown to be critical to Kenya’s economy employing close to 75% of the labour
force across all sectors of the economy. The SMEs are responsible for a huge chunk of
production and make up 20% of the country’s gross domestic product. In essence SMEs
are key to poverty alleviation in Kenya (Onyango, 2010) .In Kenya SMEs play a big role
in driving the economic growth through technological innovations, creation of
employment and promotion of exports to other countries (Becheikh, Landry and Amara,
2006).
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The impact of SMEs has been significant especially in job creation. An economic survey
carried out in 2008 showed that the SMEs were responsible for 89.9% of new jobs created
which are approximately 426.9 out of 474.5 jobs (Republic of Kenya, 2008). In 2009 the
SMEs accounted for Ksh 806,170 million of the country’s GDP which is approximately
59% of the total GDP. The rate of employment and job creation in this sector rose by
5.1% in the year 2011 owing to the increase in the number of registered SMEs from
437,300 to 445, 900. A further analysis showed that Nairobi County achieved a 5.4%
increase in the number of SMEs (Republic of Kenya, 2012).
The importance of SMEs has led the government of Kenya to partner with them in order
to achieve their economic goals by taking several measures to promote these enterprises.
In 1986 the government took the first initiative of recognizing that SMEs as potentially
strengthening the country’s economy. This was shown by publication of session paper
number 1 on ‘Economic management for renewed growth’ .this was followed by
sessional paper number 2 in 1992 on small enterprises and ‘jua kali development’ that
pointed out the need for a favorable environment in terms of legal and regulatory
framework to stimulate growth in the sector. Other actions by the government include
allocation of KSH 3.8 billion to a revolving fund for the purpose of offering credit
facilities to 8.2 candidates engaged in SMEs and the informal sector (Republic of Kenya,
2012).
Majority of SMEs face vast challenges in their quest to grow and even survive. These
challenges affect the long term competitiveness of SMEs which leads them to adoption of
various strategies including innovation. The lack of formal training and experience to the
managers however also poses a challenge in trying to implement these strategies
effectively. Innovation is also hindered by the limited resources at the disposal of most
SMEs. There is limited access to credit facilities owing to high facilitation fees, legal fees
and also high interest rates. Poor infrastructure is also a major road block to the
development of the SMEs in Kenya (Wanjohi and Mugure, 2008).The sector has also
been faced with increased competition from the players in the industry as well as large
firms that have more resources.The small and medium enterprises analyze their
environment and develop strategies to effectively adapt to the environment (Singh, Garg
and Deshmukh, 2010).
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1.2 Statement of the Problem
Strategic innovation is believed to create superior performance on the organization that
adopts it (Walker, 2004).Through strategic innovation competitiveness has grown around
the globe in different business industries (Juma and Lilly, 2014). Strategic innovation is
therefore a way in which an incoming organization is able to compete with the already
existing organizations (Juma et. al., 2014). Therefore strategic innovation focuses on the
organizations evolution overtime as it explores the unexplored positions in its industry
(Larsen, Markides and Gary, 2002). It can therefore be concluded that strategic
innovation is contributor to creation of new markets and products for the market
(Birkinshaw, Bouquet and Barsoux, 2011). However even after the benefits of strategic
innovation has been established the impact of strategic innovation on performance of
SMEs has remained misunderstood (Juma et al., 2014). One reason is because the drivers
of innovation have not been known and secondly is because innovation among the SMEs
has not been tested (Mabrouk and Mamoghli, 2010).
According to scholars in the past strategic innovation has no impact on the performance
of the SME (Pooja & Singh, 2009). However, Mwania and Muganda (2011) in their study
concluded that innovation contributed significantly on the performance of the other major
organization. Strategic innovation studies have been carried out in the Kenya however
most of studies have concentrated on the larger organizations such commercial banks
(Juma et al., 2014). According to Juma et al., banks strategic innovations have not
completely explored. This study however, does not consider the SME setting and
challenges that they face in their strategic innovation process. Another study carried out
in Kenya on strategic innovation was based in the insurance industry and concentrated
more on the strategy that the insurance companies employed in their competitive
environment (Karanja, 2009). A study carried out by Ong’olo & Awino (2013)
concentrated on comparing the SMEs and devolved Government and the challenges that
the SMEs were faced with due to the changes in regulatory procedures.
The studies discussed above concentrate more in different industries which have more
income than that found in an SME. The second reason as to why they cannot be applied is
because their target market is different as compared to that of an SME and therefore the
strategic innovation applied is different in each case. The studies that have concentrated
on looking at the SME sector in the discussion above have concentrated more on the
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challenges that the SMEs face. These challenges are different since they are regulatory
and not innovative challenges. This study therefore seeks to looks at the strategic
innovation process that an SME can use to improve on its performance in its industry.
This study will be based on three objectives which are; effect of process, product
innovation on performance of SMEs, effect of market innovation on performance and
finally organizational innovation on performance of SMEs.
1.3 General Objective
The general objective of this study was to analyze the effects of strategic innovation
practices on the performance of small and medium enterprises.
1.4 Specific Objectives
1.4.1 To establish the effect of product innovation on the performance of SMEs in
Nairobi County
1.4.2 To determine the effect of process Innovation on the Performance of SMEs in
Nairobi County
1.4.3 To establish the effect of market innovation on the Performance of SMEs in
Nairobi County
1.5 Justification of the Study
1.5.1 Academicians and Researchers
The findings of the study will contribute to the discipline of strategic management and
more so the concept of strategic innovation. Researchers and academicians in the field of
strategy will get a broader view of this concept and it will add to the existing pool of
knowledge and try to fill the knowledge gaps. It will also fill in a gap as it shows the link
between strategic innovation and performance.
1.5.2 Government Agencies
The results of the study will be important to the relevant government agencies by helping
them develop future policies that can be implemented in order to create a favorable
environment for businesses in this sector.
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1.5.3 Potential Stakeholders
Potential investors in this sector will be able to benefit from this study vastly. The results
of the findings will aid to make a choice in terms of the SMEs to invest in so that they
may get a proper return on investment for their capital.
1.5.4 Management
Management is tasked with the responsibility of spearheading the formulation of strategy
and the implementation of the strategy adopted by the Small and medium enterprises. The
study will aid the management by providing information to help in determining the
benefits of strategic innovation in improving the organizations performance as well as the
how strategic innovation will give them an edge over their rivals.
1.5.5 Financial Institutions
Financial institutions will be able to assess the long term nature and sustainability of the
SMES and will be able to tailor make credit facilities to aid them in order to finance their
strategy implement in terms of the strategic innovation practices put into place .
1.6 Scope of the Study
The study will be conducted among the several small and medium enterprises within
Nairobi County. A sample size of 100 small and medium enterprises will be chosen and
data shall be collected and analyzed. The study will be carried in between the month of
November 2015 to February 2016 .A number of limitations shall be experienced in
carrying out the study with the foremost being the inability of the respondents to give
accurate information of the questionnaires administered leading to inaccurate data as well
as the unwillingness of the respondents to participate. To mitigate against these
limitations the respondents will receive assurance of the confidentiality of the information
they will offer. In terms of the accuracy of the information from the questionnaires,
quality assurance measures shall be taken so as to enhance effectiveness of the
information collected. The interviewers shall also be trained on interviewing skills so as
to better facilitate the data collection process.
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1.7 Definition of Terms
1.7.1 Competitive Advantage
This is defined as the edge which a firm attains over its rivals through generation of
greater sales volume, better margins or retaining existing customers. A firm carries out
competitive advantage through the following avenues; the firms cost structure , better
distribution networks , maintaining customer loyalty and product offerings
(Porter,
2008).
1.7.2 Innovation
Innovation is defined as the practices that firms undertake in terms of creative ideas so as
to make a tangible difference in their operations .This is the successful implementation of
these creative ideas in the structure of an organization (Davila et al, 2006).
1.7.3 Small and Medium Enterprises
A businesses that has not more than 50 employees with an annual turnover of between
KSH 500000 and KSH 5 million with those in the service sector having a capital
formation of between KSH 5 million and KSH 20 million and KSH 5 million and KSH 50
million for those in the manufacturing sector (Kenya micro, small and medium
enterprises bill, 2011).
1.7.4 Strategic Innovation
Strategic innovation is the penetration into new markets, creation of value for customers
and redefining the existing markets through improving the value of products and services
to the customers (Gebauer, Worch and Truffer, 2012).
1.7.5 Strategy
A strategy is termed as a long term plan of action that is set in motion and is created and
implemented to achieve a set objective (Thompson et al, 2007).
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1.8 Chapter Summary
This chapter has provided a brief introduction on the intended area of study offering a
brief introduction on the Small and medium enterprises. It clearly outlines the general and
specific objectives of the study and the geographical scope of the study in which the study
will be carried out. The chapter also outlines the challenges that will be faced and how to
militate against them.The studies that have been previous done in this area are also
mentioned and the gap in knowledge existing and raises a few critical questions that need
to be answered.Chapter two of the study will look at the literature review from varied
sources and will be exploring in depth the concept of strategic innovation in the area of
study and this will be guided by the specific objectives. Chapter three will focus on the
research methodology and design that will be used in the study.
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CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 Introduction
This chapter examines various literature by several credited authors on small and medium
enterprises. The main focus of the will be to try and build a link between the performance
of these enterprises and the Strategic innovation they have employed. This chapter will
look at the concept of Strategic innovation, Strategic innovation in SMEs, the effect of
process innovation on performance of SMEs, the effects of product innovation on
performance of SMEs , the effect of and Marketing innovation on the performance of
SMEs .
2.2 Product Innovation and Performance
Product innovation can be defined as the changes made in an organization's production
line, introduction of new products in the market or use of new and better materials in the
production process (Wong, 2014). Product innovation is the process through which an
organization uses new materials to create a completely new product or at the same time
using the existing materials to create a new customer satisfaction point (Langley, Pals &
Ort, 2005). However,Wang and Ahmed (2004) defined product innovation as the process
of introducing new goods and services with the aim of attracting new customers and
therefore creating new markets. According to Wang et al., (2004) product innovation
comes into existence through the creation of new ideas and therefore cannot be separated
with process innovation. Product innovation will involve the following; technical design
of the products features, research and development and eventually marketing of the new
product through commercial activities (Alegre, 2006).
2.2.1 Importance of Product Innovation
Comison and Lopez (2010) in their study established that product innovation was
important for an organization to be able to create a competitive edge in the changing
environment. Comison et al., (2010) argued that through product innovation the
organization was able to introduce new products into the market and the quality of the
products was also improved and therefore in the organization gains competitive
advantage over the competitors in the same industry. In agreement to this argument Hult,
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Hurley and Knight (2004) stated that product innovation enabled the organization to
protect itself against threats from the competitors. Studies have also proved that there is
positive correlation between the performance of the organization and positive product
innovation (Buyus, Erickson and Jacobson, 2003). Espallardo and Ballester (2009) in a
study carried out in an organization established that product innovation had a positive
impact on the organization’s performance in its industry. Varis and Littunen (2010)
established that the more an organization was able to introduce new products into the
market the more customers associated with that organization as it is assumed the
organization is performing well.SMEs have a number of draw backs when it comes to
innovation process as compared to large organizations (Rhee, Park, & Lee, 2010).
However the SMEs have the advantage of being close to the customers and therefore have
the knowledge of the customers’ tastes and preferences as opposed to the larger
organizations (Laforet and Tann, 2006). Besides having the knowledge of the customers
changing tastes and preferences the SMESs have the advantage being able to learn and
adjust accordingly faster than the larger organizations (Garcia-morale, Llorens-Montes
and Verdu-Jover, 2007).
2.2.2 Incremental Innovation and Radical Innovation
According to Oke, Burke and Myers (2007) in their study established that SMEs
concentrate more on incremental way of product innovation as opposed to radical product
innovation which is preferred by larger organizations. Laforet et al., (2006) established
that SMEs spend most of their resources coming up with ways of incrementally
innovating products. Due to the nature of SMEs innovation is not a daily activity but only
happens when the internal structures of the organization allows (Aragon-Correa, GaciaMorales and Cordon-Pozo, 2007). Some of the internal structures that have to be in place
so that an SME can achieve its innovative target include the leadership of the SME and
the Culture (Aragon-Correa et al., 2007). To achieve the targeted benefits of innovation
resources available within the organization have to be directed to the innovation process
(Rosenbusch, Brinckmann and Bausch, 2011).
Incremental product innovation will entail few alterations in the technological aspects of
the product which involve additional benefits for the customer. The aim of incremental
product innovation is using the new technology to satisfy the needs of the customer by
11
alteration of the existing product making it different from others in the market. (Danneels
and Kleinschmidt,2001). Radical innovation on the other hand will involve something
completely new, a new idea, new technology and new novelty to the customer (Chandy
and Tellis, 2000).
2.2.3 New Product Development as a Product Innovation Strategy
SMEs are more inclined to new product development (NPD) and undertake the whole
process completely as compared to the large organizations. However, the SMEs do not
involve the whole stages of product development, and those with a complete formal new
product development strategy achieve higher quality (Huang et al., 2002).Due to the size
of SMEs and the fewer number of employees they have as compared to the large
organizations, there is more specialization in the cross functional teams formed. There is
an environment where employees are able to interact and exchange duties at tasks
therefore enabling members of the teams to have a good idea of each other’s roles in new
product development (Yap et al., 2005). However there is a limitation to this since it is
difficult for an employee to specialize in the latest technological knowhow and depending
on how the different SMEs differ in their inclination towards learning (Salavou, 2005).
For most SMEs learning is not the area of focus and if it is, the objective is developing
similar products (Mosey, 2005). The challenge being faced by SMEs in regards to
developing strategies for new product development and innovation is that most of them
have no sound data archives and most often than not, they never learn from experience.
This makes very difficult for SMEs to keep track on where they are going wrong in
regards to new product development. Tacit knowledge is important to SMEs since in
creates an avenue for them to learn from other organizations. (Lindman,2002). There is
also need for a SME to have dynamic capabilities that are specific knowledge and skills
that they learn in order to undertake an effective new product process (Eisenhardt and
Martin, 2000). Cooper and Kleinschmidt (2008) in their investigation of NPD process
identify the critical success factors that a firm needs in order to be successful; a high
quality new product process, a defined product strategy, adequate resources financial and
human resources,Research and development resources for the NPD, high quality project
teams, commitment from senior management , innovative environment and culture, use of
cross- functional teams and senior management accountability for the results.
12
Product design is a critical part of new product development and ultimately product
innovation (Perks Cooper and Jones, 2005). The product design will include changing the
usability of the product, including the materials used for the product, vendor selection,
prototyping and packaging. The product design in some quarters may be linked to the
development of the product while considering the function, use, manufacturing process
and the communication requirements (Utterback et al., 2006). Product innovation will
combine the creative effort of the designer, technical, strategic and marketing strategy of
the firm. Therefore it’s clear that there has to be a convergence of activities that need to
support product innovation (Acklin, 2011; Ravasi and Stigliani, 2012). There are some
challenges in product design with limited financial and human capital being on top of the
list. Most SMEs do not consider product design as a strategic resource thereby there is
minimal design understanding (Moultrie et al., 2007).
Due to the current environmental turbulence and competitive nature of the environment
the SMEs operate in, the design function has become a useful asset. An SME with a
higher order external resource is better placed to take advantage of any available external
resource (Belso- Martinez et al., 2011).Most SMEs have embarked on outsourcing design
as an option instead of having an in house design and having more efficient management
of the design function as resource that is vital in product innovation (Utterback et al.,
2006). SMEs can source for the services of experienced designers that can supplement the
lack of internal organization design skills and create answers to problems which could not
have been achieved. The designer is able to link the SME with knowledge that can be
applied in different socio cultural contexts so as to produce new aesthetic solutions or
products (Dell’Era and Verganti, 2009).
2.2.4 Impact of Technological Innovation on Product Innovation
Technological innovation involves the changing of a product’s functionality and plays a
critical factor in new product design and development which gives an enterprise a
competitive edge in this ever changing global market. However focus should not only be
on technological innovation but rather product design innovation should be a driver for
technological innovation (Sun and Lee, 2013). Technological innovation will have a great
impact on new product development or even introduction of new services. It will have an
impact on the new procedures, processes, product design and ultimately the quality of
production for the final product (Armbruster and Lay, 2008). According Hoegg and Alba
13
(2011) incorporating new technology and product design will lead to product innovations
and a competitive edge in the products firms have in their portfolio.
In order for firms to have greater mileage in technological capability than their
competitors they need to investment in better competences as well as resources. This will
enable the firms to be more technical and economically efficient thus leading to better
performance (Zawislak, Tello-Gamarra, Barbieux and Reichert, 2012). A firm’s
technological capability however does not develop overnight however it takes time and
accumulated experience from past interactions in the external and internal environment
and it is a reflection of the firms’ abilities to use various technical resources (Afuah,
2002).
2.2.5 Importance of Organizational Capabilities on Product Innovation
The benefits to the customer accrued from product innovation include differentiated
products that are superior, unique and quality.Apart from that they are able to take
advantage cost reduction measures and offer similar products at a lower cost (Zhou et al.,
2005). The turbulent environment and competition makes an organization to develop not
only innovative products but also new organizational methods and organizational
capabilities such organizational structures and culture that fits the strategies of the firm. In
order for this competitive advantage to be sustainable a firm needs to build organizational
capabilities that cater for different changes such as change in customer needs,
technological turbulence, and new product development (Kim et al 2012). A high degree
of adoption of organizational capabilities will also increase the speed of launching new
products to the market, lead to quality improvement in radical and incremental product
innovations. This efficiency in improvement of quality will lead to a faster response in the
customers and further lead to reduction of cost of new products (Nair, 2006).
2.3 Process Innovation and Performance
Kuratko and Hodgetts (2004) defined process innovation as idea creation that ultimately
lead to an introduction of new products and services in the market. It is believed that
innovation is a key element in the development of the economy in a country and the
industry in which that the innovation is carried out in (Beaver, 2002). Anderson, Wahab,
Amin and Chong (2009) argues that process innovation is one of the ways through which
14
an organization gains competitive advantage. Process innovation is the way through
which the organization can improve its productivity (Bakar and Ahmad, 2010).
Process innovation is about changes in technology and science with the aim of coming up
with a superior product or service that will compete favorable in the market (Harmaakorpi
and Melkas, 2008). For process innovation to be effective the organization has to include
the knowledge available in the organization, the knowledge that the organization has
gained through the learning process and finally the need of the customers in the market
(Berg, Johnson, Lorenz and Lundvall, 2007). According to Calantone, Cavusgil and Zhao
(2002) process innovation is process that is adapted by the organization in order to adapt
itself to the changes in the environment. The process of Innovation will therefore involve
building on the capabilitiesof the organization in order to create new products and
services (Yang and Choi, 2009).
For process innovation to be a success vision and strategy have to be put in place
(Lawson and Samson, 2001). Granovetter (2005) argued that innovation is created in
social network interactions by the different people that are involved in the formulation of
the process. This interaction may involve the organization suppliers, its customers, the
members of the public and the corporation (Romijin and Albaladejo, 2002). It has been
argued that an organization that has a closer relationship to the potential customers than
the competitors will have the advantage of being more creative than the competitors
hence being more innovate (Lawson and Samson, 2002). This is because the organization
will have new ideas and will be the first to introduce a new and unique product in the
market (Panayides, 2006).
2.3.1 Role of Organizational Structure in Process Innovation
For innovation to be successful in an organization flexible structures are important
(Dobni, 2008). Decentralized organizational structures are better to encourage innovation
and they are mainly found in the SMEs (Saunila, Ukko, & Rantanen, 2012). According to
Saunila et al., (2012) when an organizations structure is flexible and less bureaucratic
new ideas are easily generated and communicated for application. Communication
channels that are more emotional as opposed to rational and which are based on trust and
they are informal tend to form a base in which innovation idea generation is possible and
easily communicated to the authorities (Wang and Ahmed, 2003). Saunila et al., (2012)
15
argued that when communication is open and flexible with the organization then their
easier knowledge sharing which leads to an organization being more superior as
compared with the competitors.
According to (Rosli & Sidek, 2013) process innovation reengineering and improves the
internal functions of the organization. This involves changing the organizations functions,
technical designs and the manufacturing procedures together with a new research and
development aspect (Rosli et al., 2013). Oke et al., (2007) argues that process innovation
to be successful the organization has to improve its techniques and systems of production
of goods and services.Therefore process innovation can be described as the
improvedtechniques, devices and knowledge that are used for the making better of goods
and services by a particular organization (Wan et al., 2005).
Since process innovation is very important to SMEs the organization should use it as the
primary way to distinguish its products from those of the competitors and therefore in the
long run the organization is able to gain competitive advantage (Rosli et al., 2013). When
an organization is involved in such kind of innovation it is able to grow due to the
uniqueness of its products and services (Morone and Testa, 2008). A study carried by
Varis and Littunen (2010) established that the firms performance correlated positively
with the performance of the organization. In agreement to this Ar and Baki (2011) also
established that for an organization to outperform its competitors it has to improve its
process innovation to include technological innovation.
2.3.2 Role of Organizational Innovation in Process Innovation.
Organizational innovation refers to the adoption or creation of new management
practices, ideas or organizational forms. There are three theories for organizational
innovation
namely
organizational
design
theory,
organizational
learning
and
organizational change (Lam, 2005) .Organization design theory looks at the organization
structure and it plays a crucial role in innovation. Organizational learning is important for
innovation will look at knowledge creation and assimilation which are crucial for
enhancing the capability to innovate (Chen and Huang, 2009). It will also be described as
administrative innovation or management innovation (Damanpour, walker and
Avellaneda, 2009).
16
There two different types of organizational innovations that a firm can implement and
adapt and these are structural organizational innovations and procedural organizational
innovations (Armbruster et al., 2007). The former that is structural organizational
innovations involves the changes in the organizations structure like changing from an
organization structure that is focused on functions such as production, product
development, marketing, human resources to a structure that is focused on the customer
and their needs , business units , segments and other market segments. This will also
entail the implementing strategies that will improve the functions of theorganization and
lead to better communication channels, improvement of responsibilities, accountability
and better organizational competencies. (Kinkel et al., 2004).
Procedural organizational innovations will involve changes that will affect the activities
such the processes, operations and the way the organization behaves. This will essential
be implementing new and improved procedures of doing things in the organizations like
the just in time concepts, simultaneous engineering, zero buffer rules or the continuous
improvement of processes (Kinkel et al., 2004). Other components of organizational
innovations include work force training and incentive programmes like stock option plans
(Black and Lynch , 2005).Organizational innovation is directly linked to the increase a
firm’s capability to adapt to an ever changing environment and also drives technological
innovation (Ganter and Hecker, 2013). Organizational structure impacts positively on the
ability of the organization to learn, create new ideas as well as knowledge and
technological innovation (Günday et al. 2011). According to Liao and Wu (2010)
organizational innovation is an output that is important to firms. It acts a medium of value
creation and indicates the interaction of various practices within the organization
(Armbruster et al., 2008).
Organizational innovation is essential for performance of the firm and also acts as a
support for technical innovation (Sanidas, 2004 ). Organizational innovation will provide
the essential conditions for technical innovation which includes product and technical
innovation process (Armbruster, Bikfalvi, Kinkel, & Lay, 2008). There several examples
of organizational innovations that have been adopted by various organizations like total
quality management (TQM), Toyota production systems (TPS), Lean Production,
Divisionalization (‘M- form’) and the Balance score card(Womack & Jones, 2003; Liker
2004; Birkinshaw et al. 2008). It is clear that organizational innovation is quite different
17
from product, service and marketing innovation in that the changes are not directly
implemented are felt in the market. However the changes will both directly and indirectly
the products and services marketability. Organizational innovation will encompass both
changes in technology and anticipation in changes in the environment. These particular
changes in the organization especially in manufacturing and other work processes will
lead to the success of a firm and also boost its competitiveness (Tidd et al ., 2005). It will
lead to an improvement in efficiency, improve the exchange of information, boost the
firm‘s ability to learn and create new ideas and ultimately take advantage of new
technologies (Chavez ,2011; OECD 2005;Heidenreich 2009; Rammer et al. 2009; Zhou
2008).
2.4 Market Innovation and Performance
Rosli et al., (2013) stated that market innovation is the use of marketing mix and selection
with an aim of satisfying the customers’ preferences. Organizations should give great
importance to market innovation since it enables the organization to reach out to it’s the
customers at a faster and more efficiently (Rosli et al., 2013). Marketing innovation is
important since it enables the organization to respond to the market opportunities that the
organization should exploit and at the same time meet the customers’ needs (RodriguesCano et al., 2004). According to Audretsch (2009) entrepreneurial innovation is an
important factor in market innovation that leads to growth of the economy.
In today’s turbulent business environment, there is need for new ideas that can completely
change any aspect of the value chain. This goes beyond just innovations in products and
services. (Birkinshaw et al., 2011). According to Ren et al., (2010) marketing innovation
is a necessary tool for organizations to achieve a sustainable competitive advantage. Most
businesses focus only on technological innovations that they complete neglect marketing
innovations (O’Dwyer et al., 2009). Marketing innovation will also consist of continuous
and additional adjustments to current activities which enable small and medium
enterprises differentiate their offerings with larger firms (Epetimehin, 2011). Ultimately
firms are considered to be more innovative when they engage in marketing innovation as
part of their overall innovation strategy.
According to Grewal and Tansuhaj, (2001); Naidoo (2010) refer to market innovation as a
type of incremental innovation. In line with this view SMEs that focus on incremental
18
innovation like marketing innovation tend to be more profitable and are able have a
competitive edge that will make them able to compete with the large organizations
(Bhaskaran, 2006). Similarly it is also noted that SMEs rarely undertake internal R&D
therefore through marketing innovation they can attain successful results as large firms
with internal R&D (Rammer et al., 2009).
2.4.1 Entrepreneurial Marketing and Innovation
Entrepreneurial marketing is the combination of entrepreneurship and marketing for the
purpose of marketing innovation (Mwangi & Bwisa, 2013). With the constant need for
growth in the environment the entrepreneurship has come into play to enable the
organization to adapt to the changing environments (Bygrave, Reyholds and Autio, 2004).
According to (Hill and Hultan, 2006) entrepreneurial marketing is important since it
enables the organization to provide better services to their customers and hence the
customers fill valued and this leads to strategic positioning of the organization hence
competitive advantage. Entrepreneurial marketing can therefore be defined as an active
way of an organization identifying opportunities in the environment and maintaining their
customers and at the same time being profitable through innovation (Morris Schendehutte
and Laforge, 2002).
Mwangi et al., (2013) states that entrepreneurial marketing is a value creation process that
brings together factors of production that produce superior product with aim of exploiting
opportunities. Through entrepreneurial marketing the organization is able to achieve
strategic renewal which gives the organization a competitive edge in the environment
(Morris and Kuratko and Schindehutte, 2001). This therefore involves the creation of new
products and services (Crane, 2010). Through introduction of new goods and services into
the market the organization is able to meet the customer needs (Martin, 2009). According
to Mwangi et al., (2013) customer satisfaction leads to competitiveness of the
organization increasing in its environment. Through entrepreneurial marketing the
organization is able to achieve the key function of marketing and hence is able to
communicate with the customers (Fills, 2000).
SMEs on their part do not do marketing as the large corporations due to the limitations
that they suffer (Hill et al., 2009). Some of the methods that are applied by SMEs are
mostly traditional entrepreneurial methods that are applied in an innovative way (Kolabi,
19
Mehrabi, & Salamzadeh, 2011). One of the challenges that the SMEs face is the turbulent
environment in which they operate in (Moriarty et al., 2008). This therefore makes their
marketing decisions to be inconsistent and over reliant on the availability of resources
(Kolabi et al., 2011). For SMEs innovation relies on the individual owner of the business
and the knowledge in which they are exposed to (Odwyer, Gilmore and Carson, 2009).
They also depend on the social network in which they operate in and this networks form
the main characteristics in which the SMEs operate in (Zontanos and Anderson, 2004).
This therefore means that SMEs cannot benefit from the economies of scale that large
organizations benefit from (Odwyer et al., 2009). Therefore this has lead to SMEs
depending more on entrepreneurial marketing strategy to come up with new ways of
reaching out to the customers (Zontanos et al., 2004). Through entrepreneurial marketing
the SMEs are able to achieve the desired market share growth (Zontanos et al.,
2004).According to Kotler (2003) entrepreneurial marketing is an innovative technique
that can be easily applied in SMEs. This can be applied in three phases; the first phase
looks at how the SME owner identifies the opportunity in the market and then uses their
experience and understanding of the market to exploit the available opportunity (Hills et
al., 2006). According to Mwangi et al., (2011) the second phase is whereby the SME
gathers its techniques and come up with the road map to get to the customers’ needs
(Hills et al., 2006).
Finally the SMEs can apply comes up with a way of getting the products to the
customers. Entrepreneurial marketing is more related to the first phase of identifying the
opportunities to be exploited (Kotler, 2003). The second phase of gathering techniques to
be applied is all about growth and development of the SME (Kotler, 2003) and finally
satisfying the customers need builds on competitive positioning which leads to
competitive advantage (Mwangi et al., 2011). However, Hills et al., (2006) argued that
entrepreneurship was independent on the growth of the organization and therefore the
decline or increase in the growth may not be caused by changes in entrepreneurial
strategies.
2.4.2 Importance of Marketing Mix in Marketing Innovation
According to Martin (2009) marketing mix are the core activities that are carried out by
an organization to achieve a bigger market share and hence competitive advantage.
20
Success in the marketing process of the organization is as a result of successful
implementation of the marketing mix (Mwangi et al., 2013). According marketing mix
are the activities that marketers put in place to communicate to the customers which
include price, promotion, place and products. These elements can only be effective if they
are implemented in a step by step pattern by the organization in order to get the customer
(Mwangi et al., 2013).
It is however risky for the SMEs to imitate the large organizations way of implementing
its marketing because it may lead to loss of it entrepreneurial impact in the environment
(Martin, 2009). This is due to the nature of the organizations entrepreneurial challenges
such as financial capabilities and at the same time the nature of the SMEs opportunities
(Mwangi, 2013). It is therefore recommended that the SMEs should stick to the marketing
practices that they are more familiar with (Hill et al., 2008). This is because the
characteristic and nature of the SMEs influence the marketing techniques and hence the
outcome of the marketing process (Zontanos et al., 2004).
According to Langerak et al., (2004) SMEs should stick to their market orientation since
market orientation determines the business behavior and the innovation in which to
engage in order to perform. Though market orientation has focused majorly on exports of
larger organization it can also be applied to smaller organizations that do not take part in
export trade (Cadogan et al., 2009). For an SME to use the market orientation to its
advantage it needs to explore the impact that the market will have on its new products
(Olavarrieta and Friedmann, 2008). Market orientation has been known over time to have
a positive impact on the performance of the organization (Baker and Sinkula, 2002).
However, research has shown that market orientation has a negative impact on product
innovation (Merrilees et al., 2011). Therefore if an SME is more market oriented product
innovation may be over looked and this would lead to poor research and development
hence reducing on the introduction of new products in the market (Akman and Yilmaz,
2008).
SMEs will engage in product enhancement in order to make their offerings more
attractive to their customers. This will involve identifying the needs of consumers the
products are not meeting then designing and implementing the desired improvements to
make it more appealing (Mostafa, 2005). SMEs will therefore change the marketing mix
21
strategies and adapt certain marketing activities that some traditional marketing activities
in order to market their products (Cummins et al., 2000). SMEs will also engage in Proaction which entail engaging in forecasting and anticipating marketing activities and
putting in strategies to deal with theme rather than being reactive (Cummins et al., 2000).
Change on the other hand will refer to the SMEs acknowledging the dynamics of the
market and embracing the different transformation that are beneficial to them (Caroll,
2002).
The customer is an important element in the success of SMEs and therefore the activities
need to be customer centered and market oriented. SMEs will engage in activities of
trying to predict the customer needs and ultimately (Narver et al., 2004). SMEs Will need
a strategic vision that will focus on the market, market intelligence and will anticipate the
environmental changes of the market will be a suitable tool for enhancing efficiency and
effectiveness as well as the performance of the firm (Johannessen et al., 2001).The
marketing activities that SMEs engage in should lead to the offering of a unique
proposition to the market. The unique proposition will refer to new products or services
or processes that will enhance the marketing activities and practices that will lead to the
provision of unique products (Arias-Aranda et al., 2001).The uniqueness will focus on all
theelements of the offering (Johannessenet al., 2001).
2.4.3 Green marketing as a Form of Market Innovation
There is a growing concern for the environment all across the globe as countries continue
to industrialize. These concerns have led to organizations engaging in green marketing as
response. Green marketing will involve activities carried out by the organization such as
product design, the manufacturing process, packaging, construction and renovation,
service delivery, recycling and other forms of marketing communications. The onus on
what needs to be greened lies in the management (Prakash, 2012). The recently emerging
marketing communications avenues and growth of internet such search engine marketing,
webinars, online communities, email, newsletters and mobile marketing has created an
opportunity for organizations to be more environmentally friendly in offering their
products and services (Karjaluoto and Leinonen, 2009; Karjaluoto et al., 2008; Salo et
al., 2008; DiFrangia, 2008a; Standing et al., 2007).
22
2.5 Chapter Summary
Chapter two has provided literature review on the intended objectives. It has looked at
literature from different scholars and authorities on innovation and strategic innovation.
The chapter has sought to provide insight into the specific objectives of the study which
are; product innovation, process innovation, marketing innovation. The chapter tries to
link these objectives to the performance of SMEs in Kenya. In chapter three, the study
will provide methodology that will be used in the study. In essence the chapter will define
the research design, sampling design, methods of data collection and eventually data
analysis.
23
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 Introduction
This chapter provides the methodology that was used for the study. It looks at the
research design, the target population the sample and finally the research procedure. This
chapter also provides the method for data collection and data analysis methods to be used.
Finally this chapter also sheds light on the data collection methods to be employed, data
analysis and data presentation methods suitable for the study.
3.2 Research Design
Research design is the structure that is put in place by a researcher with the aim of getting
answers to specific questions (Coopers and Schindler, 2006). Research design can also be
defined as decisions that the researcher ought to take concerning where, what and how the
research is supposed to be planned and executed (Kothari, 2007). The study will employ a
descriptive research design which is appropriate for this kind of study since a population
can be studied through the selection of a suitable sample size (Orodho, 2008). Descriptive
research design is also appropriate since it can be used to explain the relationship or a
phenomenon that exists between variables (Beri, 2011). A survey in form of questions
was carried out by administering a given set of standardized questions in order to collect
data which shall be analyzed (Welman and Krugler, 2001). The dependent variable in
this study was the performances of the SMEs while the independent variables were
process innovation, product innovation, market innovation and organization innovation.
3.3 Population and Sampling Design
3.3.1 Population
A population as used in research methodology refers to area of study chosen by the
researcher to generate data through a sampling process which leads to data collection and
analysis to provide conclusive results that may give a picture of the entire population
(Garison, 2012).The population of a study is the total number of all the individuals which
the researcher wishes to include in the study with the aim of drawing inferences (Coopers
and Schindler, 2000). In this study the population was 534 SMEs in Nairobi County that
are registered and licensed by Nairobi county business licensing department.
24
3.3.2 Sample Design
3.3.2.1 Sampling Frame
According to Cooper and Schindler (2014), a sampling frame is a list of elements from
which the sample is actually drawn and closely related to the population. Simply put the
sample frame included the number of elements that were picked to form a sample that is
closely related to the population (cooper and Schindler, 2008). A Sampling frame that is
ideal ought to be a perfect representation of elements in the target population and it has to
exclude those not within the target population. The sampling frame can be either whole or
part of the population and is obtained from the number of SMEs in Nairobi County
specifically in the CBD, with the characteristics being an SME that employs either
product innovation, market innovation or process innovation.
3.3.2.1 Sampling Techniques
Sampling techniques are procedures that are employed to select a sample from a given
population and they can be used to infer to the particular population (De Leeuw, Hox and
Dillman 2008). There two methods of sampling, probability sampling and nonprobability sampling. Under probability sampling there are three methods which are
simple random sampling, stratified random sampling, systematic and cluster sampling
(Cooper and Schinder, 2008). The study employed simple random sampling and cluster
sampling. Using Simple random sampling was used in selecting the SMEs within Nairobi
County to ensure that all SMEs that have the characteristics under investigation have an
equal chance of being selected. Cluster sampling is necessary since the SMEs are divided
into different industries.
3.3.2.3 Sample Size
A sample size is defined as a subset of the target population chosen by the research for
study (Kothari, 2010). A sample size is determined by selecting the number of
observations to be part of the statistical sample. This is the actual number of intended
respondents of a represented population under study (Saunders et al, 2012).The sample
size for the study will be picked through stratified random sampling. The advantage of
using random sampling technique is that there is an increased sample statistical efficiency
and therefore equal representation of the population and also provide an adequate data for
the study (Coopers and Schindler, 2006). The SMEs in different streets within the CBD
25
were picked randomly for the study. The sample size (n) is determined by Fishers et al
formulae of (1998), while N is the size of the population and e denotes the error margin.
A level of 95% degree of confidence is assumed while e =0.05, for α = 0.05, z = 1.96 and
N = 534.
(𝑍)2 (𝜎)2
𝑛=
𝑒
𝑛=
(1.96×0.05)2
(0.05)2
= 184
𝑛
nadjusted = 1+(𝑛−1)/𝑁
184
= 137.047
1 + (184 − 1)/534
For this study, N = 534 and ε = 0.05 at 95% confidence level, this translated to a sample
size of 138 SMEs. The sample size of the study was therefore 138 SMEs.
3.4 Data Collection Methods
Data collection methods involve the various techniques that were employed by the
researcher to seek for data that was viable for analysis. This entailed gathering of facts
that were used by the researcher from the target population (Cooper & Schindler,
2003).The primary sources of data are employed as a mode of data collection for this
study. Questionnaires were used to facilitate data collection and they were closed ended
questions that are developed in line with the objectives of the study. A five likert - type
scale ranking was used raging form strongly agree to strongly disagree (Collis and
Hussey, 2013). The questionnaire in itself was divided into four sections, with the section
one; covering the background of the respondent, section two; the effect of product
innovation on the performance of SMEs , effect of process innovation on the performance
of SMEs , effect of market innovation on the performance of SMEs. The approach used
was online questionnaires as well a drop and pick strategy.
26
3.5 Research Procedures
The questionnaire was designed based on the research objectives; it was pretested to
ensure that was suitable and reliable for the study before the actual study process. The
pretesting was done by administering the questionnaire to 10 respondent chosen from the
population and who were not included for the actual study. This enabled the researcher to
determine the time that a respondent would take to answer the questionnaire and refine
the questionnaire to make it easier for the respondent to answer. The questionnaires were
then administered to the respondents by a research assistant. To ensure impartiality to the
response of the questionnaire pretesting was done to make sure that the questions were
easily understood and that they gather relevant data from the respondent. There was a
cover letter explaining the reasons for the research, the importance and confidentiality of
the respondents so as to increase the response rate. Additionally, the questionnaires had
an attractive layout, sequential numbering and free from jargon.
3.6 Data Analysis Method
Data analysis involves organizing of huge raw data into tables, charts, frequency
distribution charts and percentages in order to interpret it and make viable conclusions
(Crosby, 2001). The questionnaires were coded so as to minimize errors and ensure
accuracy during the performance and regression to establish the effect of the independent
variables on the dependent variable data analysis and eventually descriptive statics
employed. The data was then coded and cleaned and then keyed to computer Statistical
Package for Social Scientist (SPSS). The study employed Pearson correlation to analysis
the relationship between strategic innovation and firm’s
3.7 Chapter summary
Chapter three has given the methodology that was used for the research. Descriptive
research design was used for the research. Population and the sample size have also been
indicated in this chapter. The chapter also highlights the data collection tool which will be
the questionnaires. The next chapter will be chapter four. It shows the results and findings
of the research SPSS used to analyse the data and presented in tables and figures.
27
CHAPTER FOUR
4.0 DATA ANALYSIS AND INTERPRETATION
4.1 Introduction
This chapter presents the findings and interpretation of the study. The results are given in
sections starting with the demographic information of the respondents which has
information on the gender, age, education level, type of organization and industry, age of
the businesses among others. This is followed by section on the objectives of the study
such as on the product innovation, processes and market innovation and their relationship
with the performance of the SMEs.
4.1.1 Response rate
The sample size for this study was 138 respondents. The number of questionnaires filled
and collected was 116 while those which were unattended to were 22. This translates to a
response rate of 84% as shown in table 4.1. According to Mugenda and Mugenda (2003),
a response rate of more than 70% is excellent and reliable for a study.
Table 4. 1: Response rate
Questionnaires
Number
Percentage
Filled and collected
116
84
Unfilled/uncollected
22
16
Total
138
100
4.2 Demographic information
This section presents findings on the demographic information of the respondents and the
type of business they were running at the time of the study.
4.2.1 Gender
Gender is a very important consideration in life today. Article 81 (b) of the Constitution
of Kenya (CoK, 2010) underscores the gender equity by stating that not more than twothirds of the members of elective public bodies should be of the same gender. In this
study, majority were female respondents (55.7%) while men accounted for 44.3% as
28
shown in figure 4.1. This indicates that that gender roles are slowly changing and women
are no longer being house wives but also part of the family providers through businesses.
55.7%
44.3%
60.%
Percentage
50.%
40.%
30.%
20.%
10.%
.%
Male
Female
Gender
Figure 4. 1: Gender of the respondents
4.2.2 Age bracket
The researcher collected information from the respondents on their ages. The result shows
that majority of them were between 26 and 33 years (54.8%), followed by those who
were aged between 18 to 25 years (29.6%) and 34-41 years (10.4%). This implies that
most of the respondents were young adults. This shows that the youth are becoming more
active in the businesses and also how significant SMEs are absorbing a great proportion
of youths in as employees to run the businesses.
54.8%
60.%
Percentage
50.%
40.%
29.6%
30.%
20.%
10.4%
10.%
5.2%
.%
18 -25
26-33
34-41
Age bracket
Figure 4. 2: Age bracket of the respondents
29
42-49
4.2.3 Education level
Information on the level of education of a given population is very important for planning
purposes to the authorities. The result shows that most of the respondents (41.7%) had
degrees, 39.1% had studied to the diploma level and 11.3% had graduate studies. This
shows that most of the respondents who took part in this study had good education. A
good education implies some level of power. Thus such people have some good
understanding of the source of credit for their businesses and can easily be trained on
entrepreneurship because of their literacy level. Also such education shows that some had
good education such as degrees, master’s and doctorate studies which shows they opted
not to pursue formal employment but self-employment which points to the changing
mindset of the people from white-collar jobs to self-employment despite the level
Percentage
education.
45.%
40.%
35.%
30.%
25.%
20.%
15.%
10.%
5.%
.%
41.7%
39.1%
11.3%
7.%
.9%
Secondary
Diploma
Degree
Masters
PhD
Level
Figure 4. 3: Education level of the respondents
4.2.4 Type of business
The researcher collected information on the types of businesses the respondents were
running at the time of the study. The result shows 43.9% were running limited liability
companies, 28.9% sole proprietorship, 20.2% partnership and 7% in other types of
businesses as shown in figure 4.4. This shows a mix of businesses and companies which
require high technical skills to run such as the limited companies. Thus the level of
managerial skills required to run such companies has to be exposed and tactful. This ties
well with the level of education of the respondents who this study found to have very
good education.
30
43.9%
Percentage
50.%
40.%
28.9%
30.%
20.2%
20.%
7.%
10.%
.%
Sole
proprietorship
Partnership
Limited liability
Company
other
Type of business
Figure 4. 4: Type of business
4.2.5 Type of the industry
The respondents were running different types of businesses in different industries. Figure
4.5 shows that they were running different industries. Most of them were in ICT (18.6%),
hospitality (18.6%) and manufacturing (16.3%) industries. Others were in food and
beverage, banking and financial services and transport industries as shown in figure
4.5.This shows that the data collected cuts across a variety of businesses. This was helpful
since different types of businesses have unique strategies and a combination of many
businesses gives a broad understanding of the strategic innovations and choices being
Percentage
pursued in the market by different players.
20.%
18.%
16.%
14.%
12.%
10.%
8.%
6.%
4.%
2.%
.%
16.3%
18.6%
18.6%
11.6%
11.6%
11.6%
8.1%
3.5%
Industry
Figure 4. 5: Type of the industry
31
4.2.6 Level in the Business
The researcher collected information from the respondents on their positions in the
businesses they were operating. Figure 4.6 shows that majority of the respondents were
employees (74.6%) and 25.4% were owners. Thus the study enjoyed a mix of opinions
from both owners and employees. The study shows quite a good number of respondents
were owners. The presence of owners gave the researcher the opportunity to get
managerial perspective and also employee’s perspective of the businesses.
74.6%
Percentage
80.%
60.%
25.4%
40.%
20.%
.%
Owner
Employee
Level of ownership
Figure 4. 6: Level in the Business
4.2.7 Number of employees
The size of a business can be defined by the number of employees working with it. In this
study, most of the businesses (41.4%) had more than 20 employees, followed by those
businesses which had between 1-5 employees (33.6%). This shows that most of the
businesses were big enough to accommodate more than 20 employees. This agrees with
the results of the study on the type of businesses where most were found to be limited
liability companies. This high number of employees shows how important SMEs can be
to the economy in terms of job creation.
32
41.4%
Percentage
50.%
40.%
33.6%
30.%
15.5%
20.%
9.5%
10.%
.%
1-5
6-10
11-20
Above 20
Number of employees
Figure 4. 7: Number of employees
4.2.8 Age of business in years
The results in figure 4.8 shows the ages of the businesses sampled. From the results, most
of the businesses had operated for more than 9 years (37.9%), 28.4% had operated for a
period between 3 and 5 years and 25.9% for 2 or less than 2 years. This shows that most
of the businesses had been in operation for more than 9 years which signifies strength of
the businesses. The long period of time businesses had been in operation shows that the
operators of such businesses had become oriented to the business environment and their
businesses were sustainable.
37.9%
Percentage
40.%
30.%
28.4%
25.9%
20.%
7.8%
10.%
.%
0– 2 years
3– 5 years
6- 8 years
above 9 years
Age of the business in categories
Figure 4. 8: Age of business in years
4.2.9 Performance of the SMEs
The researcher collected information on the performance of the SMEs. The information
was collected on five-point likert scale. The data was analyzed through mean and
standard deviation. A mean value of more than 4.4 represented strongly agree, 3.5-4.4
33
‘agree’, 2.5-3.4 ‘uncertain’, 1.5-2.4 ‘disagree’ and lastly less than 1.5 ‘strongly disagree’.
Standard deviation was used to indicate the dispersion of the responses which in turn
showed the consensus. A value of more than 1.0 indicated lack of consensus and a value
of less than 1.0 indicated consensus. The results are shown in table 4.2.
Table 4. 2: Performance
Mean
The management is committed to sustainability and good reputation in
the long run
The firm’s performance is key to the employees of the organization
Productivity of the organization improved in the last 2 years
There has been an increased sales turnover over the past 2 years
The organization’s profitability has been on the rise for the last 5 years
There has been an increase of market share of organizations for the past
3years
SD
4.40
4.40
4.19
4.17
4.06
0.7
0.8
0.7
0.8
0.8
4.00
0.9
Key: 1= strongly disagree, 2=Disagree, 3=Uncertain, 4=Agree, 5= Strongly Agree
According to the findings, the respondents agreed with some aspects related to their
SMEs performance. Firstly, there was a general agreement that managers were committed
to ensuring that their business operations were sustainable and maintained good
reputation in the long run, firm performance was key aspect to the organizations and the
productivity of their organizations had improved in the last 2 previous years. The
respondents agreed further that the turnover of their businesses had increased
accompanied by an increasing trend of profitability and market share in the last years.
4.3 Product Innovation and Performance
This section discusses the findings on the product innovation and the performance of the
SMEs sampled by the study.
4.3.1 Descriptive Statistics of Product Innovation and Performance
The information was collected on five-point likert scale. The data was analyzed through
mean and standard deviation using a 5-point likert scale which was used in table 4.2. The
results are shown in table 4.3.
34
Table 4. 3: Descriptive statistics of Product Innovation and Performance of SMEs
Product innovation is part of the organization’s vision and mission
Improving the quality of the products is one of the key objectives of
the organization
The business specializes on goods that are most preferred by the
customers
Product innovation is considered as means of achieving a firm’s
competitive advantage
The owner of the business allows communication within the business
for new ideas
The new good made us better than our competitors in the same
industry
Improving employee commitment , morale or both is part of the
product innovation strategy adopted by the firm Employees are
rewarded for coming up with new product ideas for improvement of
existing products
Employees are rewarded for coming up with new product ideas for
improvement of existing products
Mean SD
4.45
0.7
4.45
0.6
4.40
0.6
4.27
0.7
4.27
0.9
4.17
0.9
3.86
1.2
3.54
1.3
Key: 1=Strongly disagree, 2=Disagree, 3=Uncertain, 4=Agree, 5= Strongly Agree
According to the results in table 4.3, the respondents strongly agreed that innovation of
products was part of the vision and mission as well as improving the quality of the
products of their organizations. According to the respondents, their businesses specialized
on goods mostly preferred by the customers, perceived product innovation as a means of
achieving firm’s competitive advantage and allowed communication of new ideas in their
organizations. They further held that new goods made their businesses better than that of
their rivals. Lastly, the respondents agreed that their companies had adopted the strategy
of improving the morale of the employee to come up with new ideas for improving the
existing products and rewarding them whenever developed new product idea although
there was no consensus on the last two points meaning that some of the businesses had no
such strategies.
Apart from the above findings, the respondents further suggested that their companies’
products could be more appealing to the customers by offering good design, high quality
and genuine products, competitive pricing strategies such as giving discounts, low
pricing, attractive packaging of the products, diversification of the products and tailoring
the products to the customers’ needs among other suggestions.
35
4.3.2Regression test of Product Innovation and Performance
The regression test was done to establish the effect of product innovation on the
performance of the SMEs sampled. The results are discussed in the following paragraphs.
Table 4. 4: Model Summary, Product innovation and Performance
Model
R
R Square
Adjusted R Square
a
1
.648
.419
.414
a. Predictors: (Constant), ProductInnovation
Std. Error of the
Estimate
.44354
The model summary table shows that R value was 0.648 and the R squarewas 0.419. This
shows that product innovation affects the variation of performance of the SMEs by 41.9
percent and the rest 58.1% was explained by other factors which are not considered in the
model and also by the error term.
Table 4. 5: ANOVA, Product innovation and Performance
Sum of
Model
Squares
df
Mean Square
1
Regression
15.773
1
15.773
Residual
21.837
111
.197
Total
37.610
112
a. Dependent Variable: Performance
b. Predictors: (Constant), Product Innovation
F
80.179
Sig.
.000b
The Analysis of Variance (ANOVA) table shows that F statistics was given by F value of
80.179 reflected a significance level of 0.000 meaning the test statistic is significant at
that level. This shows that product innovation has a statistical significance effect on the
performance of the SMEs at 95% confidence level.
Table 4. 6: Coefficient, Product innovation and Performance
Unstandardized
Standardized
Coefficients
Coefficients
Model
B
Std. Error
Beta
1
(Constant)
1.462
.309
Product innovation
.656
.073
.648
a. Dependent Variable: Performance
t
4.734
8.954
Sig.
.000
.000
The coefficient table shows a t statistics value of t (111)=8.954, p=0.000. This shows that
at 95% confidence level, the influence of product innovation on the performance of the
36
SMEs is significant. The results mean that a development of a new product holding other
factors constant increases the performance by 0.648 units. This shows that product
innovation improves the performance of the SMEs.
4.4 Process Innovation and Performance
This section has results on process innovation and the performance of the SMEs. The
results are discussed in section son descriptive statistics, correlation and regression tests.
4.4.1 Descriptive Statistics on Process Innovation and Performance
Similar to table 4.2, the data was captured on a 5-point likert scale and analyzed through
mean and standard deviation as shown in table 4.7.
Table 4. 7: Descriptive statistics- Process innovation and Performance
Mean SD
Smooth workflow through process innovation leads to customer
satisfaction
Improving service quality through process innovation is one of the key
objectives of the organization
Technological changes within the organization have led to the overall
good performance of the organization
New business methods are usually worth trying even though they may
prove risky and costly
Introduction of new systems leads to better cash flows
There has been increase of sales after the organization introduce new
systems of workflow management
There has been cost reduction and efficiency in service delivery after
introduction of a new system
There has been increased savings with introduction of proper inventory
management systems such as Just in time systems
There has been training on new computer based programmes in the last
6 months
There are programmes to stimulate the creation of new ideas for
employees
4.36
0.7
4.29
0.8
4.18
0.8
4.15
4.09
0.8
0.9
4.00
0.8
3.83
0.9
3.82
1.0
3.55
1.3
3.55
1.1
Key: 1= strongly disagree, 2=Disagree, 3=Uncertain, 4=Agree, 5= Strongly Agree
The respondents agreed that smooth workflow through process innovation led to
customer satisfaction and changing the process to improve the quality of the products was
a key objective in their businesses. Changes in technology within the businesses were
reported to contribute to good performance of the businesses and felt that new business
methods were worth trying regardless of whether they were risky and costly. The
37
respondents further agreed that new systems led to better cash flow, management of new
systems on workflow increased sales volume and led to cost reductions and efficiency in
service delivery. Further the respondents, agreed that introduction of proper inventory
management system (just in time systems) increased savings, and that their organizations
had introduced trainings on new computer-based programs which could stimulate creation
of new ideas by the employees although there was no consensus on the last three aspects
which showed that some had no such programmes and systems.
The respondents made other suggestions on process innovations as a way of improving
the performance of the SMEs. The most recommended suggestions included adopting
changing technologies, training employees on new systems, thorough marketing of
products and services, employing more qualified staff, adopting cost effective processes ,
investing on research and upgrading to computerization and automation of systems.
4.4.3 Regression Test Process Innovation and Performance
Regression test was used to determine the effect of process innovation on the
performance of the SMEs.
Table 4. 8: Model Summary, Process Innovation and Performance
Model
R
R Square
Adjusted R Square
1
.374
.140
.132
a. Predictors: (Constant), Process Innovation
Std. Error of the
Estimate
.53993
The R value shown in the model was 0.374 while the value of the R Square value was
0.140. This shows that process innovation accounts for 14.0% of the variations in
performance of SMEs and the rest 86.0% by other factors which are not in the model.
Table 4. 9: ANOVA- Process innovation and Performance
Model
Sum of Squares
df
Mean Square
1
Regression
5.251
1
5.251
Residual
32.359
111
.292
Total
37.610
112
a. Dependent Variable: Performance
b. Predictors: (Constant), Process Innovation
38
F
18.012
Sig.
.000b
The ANOVA table shows an F statistic of F (1, 111)=18.012, p=0.000. This means the F
value of 18.012 reflected a significance level of 0.00 meaning the test statistic is
significant at that level. Process innovation has a statistically significance effect on the
performance of the SMEs. It also shows that the model was fit for regression tests.
Table 4. 10: Coefficients, Process Innovation and Performance
Unstandardized
Standardized
Coefficients
Coefficients
B
Std. Error
Beta
2.777
.340
Model
1
(Constant)
Process
.360
Innovation
a. Dependent Variable: Performance
.085
.374
t
8.171
Sig.
.000
4.244
.000
Table 4.14 shows the coefficient of regression of the test, the t statistic value is given as t
(111) = 4.2444, p= 0.000 which further confirms that process innovation had a significant
effect on the performance of the SMEs.
The results show that an extra innovation in the processes holding other factors constant
increased the performance of the SMEs by 0.374 units. This shows that increasing the
innovations on processes have a positive effect on the performance of the SMEs.
4.5 Market Innovation and Performance
This section discusses the relationship between market innovation and performance of the
SMEs. The section has sub-sections on the descriptive statistics, correlation test and
regression test.
4.5.1 Descriptive Statistics on Market Innovation and Performance
The information was captured on a5-point likert scale and analyzed through mean and
standard deviation. All the scales and method of analyzed were similar to those used in
table 4.2. The results are shown in table 4.15.
39
Table 4. 11: Descriptive statistics, Market innovation and performance of SMEs
Mean SD
A sound marketing strategy is important to the organization in the long
run
Customers’ needs and preferences keep on changing
There are new opportunities of doing business that have been identified
by the business
The use of online tools and social media has helped the company grow
and attract new clients
The business has changed its way of marketing in the last one year.
Goods/services produced by the business are considered unique from
other businesses
The business researches on what customers want before they ask for it
There is sufficient access to information on what the competition is
doing
The prices offered by the business are lower than those of other
businesses in the same industry
4.37
4.29
0.7
0.7
4.21
0.7
4.20
4.06
0.8
0.9
4.04
3.95
0.9
1.0
3.90
0.9
3.42
1.3
Key: 1= strongly disagree, 2=Disagree, 3=Uncertain, 4=Agree, 5= Strongly Agree
The respondents agreed that sound marketing strategies were important to the businesses
in the long run to accommodate the changing needs and preferences of the customers. The
respondents also agreed that their businesses had identified some new opportunities
which they could exploit. The results show that the businesses had changed their
marketing strategies and now embraced new strategies such as the use of online tools and
social media. The respondents felt that their businesses produced unique goods and
services. Also they agreed that their businesses did research on what customers wanted
before they asked for it. However, the standard deviation was 1.0 indicating lack of
consensus which further means that some of the businesses did not do such researches.
There was an overall agreement amongst the respondents that there was sufficient access
to information on what the competition was doing. Lastly, the respondents were uncertain
on whether their individual prices of goods and services were lower than those of their
competitors in the same industry. There was no consensus on this finding which indicated
that some of the respondents knew that they offered lower prices than that of their
competitors.
The respondents felt that market innovations could further include other activities such as
use of online tools and social media, use of media in advertising, researching of new
products, opportunities and on the market competition, personal selling, use of billboards,
posters, flyers, promotional offers, discounts, exhibitions, door to door
40
4.5.3 Regression Test of Market Innovation and Performance
The researcher did a regression test to establish the effect of market innovation on the
performance of the SMEs. The results are discussed in the following paragraphs.
Table 4. 12: Model Summary, Market innovation and Performance
Model
R
R Square
Adjusted R Square
1
.523
.274
.267
a. Predictors: (Constant), Market innovation
Std. Error of the
Estimate
.49897
The model summary shows the R value of 0.523 and an R Square value of 0.274. This
means that market innovation explains 27.4% of the variations in performance of the
SMEs.
Table 4. 13: ANOVA, Market Innovation and Performance
Sum of
Model
Squares
df
Mean Square
1
Regression
10.238
1
10.238
Residual
27.137
109
.249
Total
37.375
110
a. Dependent Variable: Performance
b. Predictors: (Constant), Market innovation
F
41.121
Sig.
.000b
The ANOVA test results shows an F statistic value as F (1, 109) = 41.121, p=0.000. The
F value of 41.121 reflected a significance level of 0.00 which means the test statistic is
significant at that level. This implies that market innovation has a significant statistical
effect on the performance of the SMEs which generally shows that the model is fit.
Table 4. 14 Coefficients, Market Innovation and Performance
Unstandardized
Standardized
Coefficients
Coefficients
Model
B
Std. Error
Beta
1
(Constant)
1.561
.414
Market innovation
.654
.102
.523
a. Dependent Variable: Performance
t
3.772
6.413
Sig.
.000
.000
The results shows that market innovation has a statistically significant effect on the
performance as shown by the t statistic value t(110)=6.413, p=0.000 at 95% level of
confidence.
41
An extra development of market innovation would increase the performance of the SMEs
by 0.523 units. This shows that increasing the market innovations led to increase in the
performance of the SMEs. Thus market innovation increases the performance of the
SMEs.
4.6 Chapter Summary
This chapter presented the results of the study. The data gathered was analyzed using
descriptive statics. The data outlined the background information of the various
respondents which was then represented inform of bar graphs. The data was subsequently
analyzed using descriptive statics and regression analysis used to interpret the results in
regards to the research objectives. The next chapter will outline the discussions,
recommendations and conclusions made from the study.
42
CHAPTER FIVE
5.0 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter is a continuation of chapter four on data analysis. The chapter presents the
summary of all the findings, discussion of the findings, conclusion and recommendations
of the study. The section on discussion of the findings compares closely with previous
studies and concepts on the study with a view of having a deeper understanding of the
subject and the meaning of the results.
5.2 Summary of the Findings
This main objective of the study was to determine the effect of strategic innovation on the
performance of the SMEs in Nairobi County. The study revolved around these three
objectives; establish the effect of product innovation on the performance of SMEs,
determine the effect of process Innovation on the Performance of SMEs, establish the
effect of market innovation on the Performance of SMEs.
The research done relied on a descriptive survey where138 SMEs were targeted from a
population of 534 SMEs and data collected using questionnaires which were coded and
cleaned so as to minimize errors and ensure accuracy. The questionnaires analyzed using
SPSS statistical package for social scientist so as to obtain descriptive statistics. The data
was further presented into tables and figures for the purpose of interpretation.
The study found that product innovation influences the performance of the businesses and
those organizations had put as part of their organization’s vision and mission. SMEs have
prioritized improving the quality of products as a key objective of their organization and
thus most SMEs specialized on goods customers mostly preferred and product innovation
was considered as a way of achieving competitive advantage of the businesses. This is
evident from the results where product innovation had a beta of 0.648 which showed
there is a positive significant relationship between product innovation and performance of
SMEs.
43
It was also determined under the second objective that processes innovation was also a
key aspects and a source of competitive advantage of the SMEs. The study found that
process innovation improved the performance of the SMEs. Such innovations in
processes led to smooth work flow, improved service and quality of products, better cash
flow among other key competitive advantages for the SMEs. The beta coefficient of
process innovation was 0.374 which shows a positive significant relationship between
process innovation and performance.
The last objective established that market Innovation also contributed positively to the
performance of the SMEs and organizations were committed to having sound marketing
strategy. The changing customer needs required update in marketing strategy which could
make the products accessible to the customers and also appealing to them. The beta
coefficient was 0.523 which shows a positive significant relationship between Market
innovation and performance
5.3 Discussion of the Findings
5.3.1 Product Innovation and Performance of SMEs
The results showed that innovation of products was part of the vision and mission of the
businesses and had set quality production as an objective of their businesses. This shows
that innovation of products had a strong bearing in these SMEs. Wang and Ahmed (2004)
viewed product innovation as the process of introducing new goods and services with the
aim of attracting new customers and therefore creating new markets.
Businesses have specialized on goods that are most preferred by the customers. This is
done to ensure that customers’ needs are met by the businesses. The study found that
businesses considered product innovation as a means of achieving a firm’s competitive
advantage and managers allowed communication of new ideas within their businesses
because any new product developed made such businesses better than their competitors.
This agrees with the views of Comison and Lopez (2010) that that product innovation was
important for an organization to be able to create a competitive edge in the changing
environment.
The results on product innovation show that companies and businesses product
innovation strategy included improving employee morale and commitment or rewarding
44
them whenever they come up with new product ideas. This agrees with Rosenbusch,
Brinckmann and Bausch (2011) who argued that to achieve the targeted benefits of
innovation resources available within the organization have to be directed to the
innovation process. However, the results had no consensus which indicates that some
businesses had not adopted such in their product innovation strategy.
The correlation test showed that product innovation and performance of the SMEs had
strong positive and significant relationship. This shows the association established was
not due to any chance but was consistent across all the businesses. This concurs with the
views of Buyus, Erickson and Jacobson (2003) who found a positive correlation between
the performance of the organization and positive product innovation. This relationship
was further affirmed by the regression test which showed that innovation of products led
to increased performance of the SMEs in general. Similar results were obtained by
Espallardo and Ballester (2009) who found that product innovation had a positive impact
on the organization’s performance in its industry. This performance was measured based
on the market share, profitability, sales volume and productivity among other aspects.
The results show how innovation on products is key to the businesses and the contribution
it has on performance of such businesses.
5.3.2 Process Innovation and Performance of SMEs
The processes used by a business on a daily basis largely determine several aspects of the
business such as speed, quality, efficiency, productivity among other performance
indicators. Kuratko and Hodgetts (2004) argued that process innovation was a sort of idea
creation that ultimately leads to an introduction of new products and services in the
market. In this study, one of the key objectives of the businesses sampled was improving
the quality of services through product innovation. This agrees with views of Anderson,
Wahab, Amin and Chong (2009) who argued that that process innovation was one of the
ways through which an organization gains competitive advantage. The business operators
felt that product innovation led to smooth workflow in the business activities which in
turn led to customer satisfaction. Similarly, Bakar and Ahmad, (2010) innovation of
processes improved the productivity of the businesses.
The results further showed that technological changes within the businesses and
companies had a positive overall effect on performance of the organizations. New
45
business methods and new systems led to better flow of cash even if they were risky and
costly. Harmaakorpi and Melkas (2008) also argued that businesses change in technology
and science with the aim of coming up with a superior product or service that compete
favorably in the market.
The introduction of new system led to a reduction of the costs and increased the
efficiency in service delivery. Other advantages accrued from new processes include
increased savings through introduction of proper inventory management system such as
the just in time systems among others. Kinkel et al (2004) argued that implementing new
process strategies improve the functions of the organization and lead to better
communication channels, improvement of responsibilities, accountability and better
organizational competencies.
The study found that some business had begun training employees on new computer
based programs. Also there were other programs to stimulate the creation of new ideas for
the employees which shows that some business invested in training as a way of
stimulating new ideas from the employees. Tidd et al, (2005) also held similar opinion
that particular changes in the organization especially in manufacturing and other work
processes will lead to the success of a firm and also boost its competitiveness. However,
some of the business had no such training or programs as showed by the value of the
standard deviation.
As a further proof of the descriptive statistics, a correlation test was done between process
innovation and the performance of the SMEs. A significant positive correlation was
established between process innovation and the performance of the SMEs. Varis and
Littunen (2010) also established that the firm’s performance correlated positively with the
performance of the organization. A regression test done further showed a causal-effect
relationship between the two variables that process innovation affects the aspects of
performance such as the market share of the company, the rate of sales turnover, the
productivity and the profitability of the businesses.
5.3.3 Market Innovation and Performance of SMEs
The concept of marketing is a very important aspect in any business. A business without a
market cannot thrive because it depends on the market for sustainability. Rosli et al.,
46
(2013) stated that market innovation is the use of marketing mix and selection with an
aim of satisfying the customers’ preferences. The study found that sound marketing
strategies were key to the SMEs business operations. The business operators
acknowledged that the needs and preferences of the customers kept on changing and they
kept identifying new businesses opportunities to exploit. According to Rodrigues-Cano et
al. (2004), marketing innovation enables the organization to respond to the market
opportunities that the organization should exploit and at the same time meet the
customers’ needs.
The results show that SMEs constantly changed their marketing strategies. This use of
new marketing platforms such as online tools and social media helped the companies and
business to grow and attract new customers. According to Audretsch (2009),
entrepreneurial innovation is an important factor in market innovation that leads to
growth of the economy. Businesses ventured and capitalized on offering goods and
services which were unique as a way of attracting new customers. Hill and Hultan, (2006)
held similar views that entrepreneurial marketing was important since it enables the
organization to provide better services to their customers and hence the customers fill
valued and this leads to strategic positioning of the organization hence competitive
advantage.
On marketing researches, some businesses and companies were found to have conducted
market researches and established needs of the customers before thee customers asked for
them although had not done such researches. This could be attributed to the perception of
the customers that they had sufficient access to information on competition in the market.
The results further indicated that some business competed on pricing strategies by
offering lower prices than their competitors while others competed using other strategies.
Mwangi et al., (2013) held that entrepreneurial marketing was a value creation process
that brought together factors of production that produce superior product with aim of
exploiting opportunities.
The relationship between market innovation and performance was found to be strong,
positive and significant. Similarly, regression test showed that market innovation affects
the performance of the SMEs. All the results agrees with the views of Zontanos et
al.,(2004) who observed that through entrepreneurial marketing the SMEs could
47
to
achieve the desired market share growth. A new innovation by a business or a company
had a potentially good effect on the performance of such business in the market.
5.4 Conclusions
5.4.1 Product Innovation and Performance of SMEs
The study concludes that innovation on goods and services offered by a business or a
company influences the performance of the SMEs. Innovation enables companies to offer
what the customers’ needs by improving the quality of the products and at the same time
achieving a competitive edge for the companies.
Some managers have allowed free communication of new ideas within their organizations
so as to stimulate product innovations. Others have incorporated strategies which spur
employee morale and commitment towards innovations as a way of broadening the scope
of innovation in their businesses which in turn creates competitive advantage for such
businesses.
5.4.2 Process Innovation and Performance of SMEs
The study notes that process innovation and performance of SMEs have a positive
relationship. This is due to the fact that process innovation influences the performance of
the SMEs in terms of markets share, sales turn over, productivity among others.
The study notes that process innovation accrued several advantages to the businesses such
as smooth workflow and improved quality of products and services. SMEs were thus
employing new technological advances into their businesses, new systems of operations
and new inventory management systems which increased the cash flows, reduced costs,
increased efficiency in services delivered and improved the overall savings of the
businesses.
5.4.3 Market Innovation and Performance of SMEs
The study concludes that innovations in marketing have a strong positive association with
the performance of the SMEs. This is due to the fact that customer needs and preferences
keep on changing in order to adapt to the changes.
The study notes that businesses innovate markets differently: such as using differently
online tools and social media, changing marketing strategies after some time, identifying
48
new market opportunities, offering unique goods and services, doing researches on the
needs of the customers among other marketing activities. Some have used pricing
strategies in their marketing to compete with their rivals in the market.
5.5 Recommendations
5.5 .1 Recommendations on Practice
5.5.1.1 Product Innovation and Performance of SMEs
The study found that innovations of new products improved the performance of the
SMEs. As part of product innovation strategy, some companies and businesses have
incorporated employee motivation and reward for any product innovation idea they
develop. However, other businesses have not adopted employee participation in their
product development. It is recommended that management of companies and businesses
align employee participation in their product development strategies to ensure all staff
members take part in product development.
5.5.1.2 Process Innovation and Performance of SMEs
The study found that some companies and businesses had not begun using new inventory
management systems such as just in time systems which enabled other businesses to
make a lot of savings. It is recommended that SMEs invest in new systems and processes
such as inventory management systems to benefit the advantages associated with such
technologies.
5.5.1.3 Market Innovation and Performance of SMEs
The study found that some businesses did business researches on the need of the
customers and other engaged on pricing strategies which substantially improved their
overall performance. However, some businesses did not do market research or do any
strategic pricing in marketing. It is thus recommended that SMEs embark on serious and
strategic marketing with different strategies which can enable them to outperform their
competitors and maintain their market share as well as their competitive edge.
5.5.2 Recommendations on Further Research
The study collected information from SMEs whose operations and scope are minimal and
mostly in small units. Their structure and operations and management is different other
49
big companies organizations. In order to better understand the effect of strategic
innovation on the performance of businesses. It is recommended that further studies be
done on other big companies and business to establish the relationship between strategic
innovations and performance.
50
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Appendix I: Cover Letter
Paul Owino Osuga,
United States International University- Africa
P.O.Box 14634 -00800
Nairobi
18th April, 2016
Dear Respondent,
RE: REQUEST FOR PARTICIPATION
I am conducting research on “The effects of strategic innovation on the performance of
small and medium enterprises in Nairobi County.” This is in Partial Fulfillment of the
requirements of the Masters of Business Administration degree program at the United
States International University.
I hereby request you to fill the attached questionnaire to your best knowledge and
understanding. Information provided will be highly confidential. Further if you wish to
access a copy of the final report I will be able to avail this.
Thank you for your time and cooperation.
Kind Regards,
Paul.
62
Appendix II: Study Questionnaire
The Effects of Strategic Innovation on the Performance of Small Medium
Enterprises in Nairobi County.
SECTION 1: GENERAL INFORMATION
Kindly note this survey is an academic exercise and all information given by the
respondent will be treated with utter most confidentiality. Kindly answer all the questions
either by ticking () boxes or writing in the spaces provided. Your unbiased response is
highly appreciated.
1. Please indicate your gender
Male { }
Female { }
2. Kindly indicate your age bracket
18 -25
{ }
26-33 { }
34-41 { }
42-49 { }
50 and above { }
3. Indicate your educational level
Secondary { }
Diploma
{ }
Degree
{ }
Masters
{ }
PhD { }
4. The type of organization
Sole proprietorship { }
Partnership { } Limited liability Company { } other
{ } If other, please specify…………………………………………
5. Kindly indicate the industry your organization falls in
Manufacturing
{ }
ICT
{ }
Banking and Financial Services, { }
Education { }
Medical { }
Food and beverage { }
Hospitality { } Transport {
} IfOther, Please specify…………………………………………………
6. Level in the business Owner {
7.
}
Employee {
}
The number of Employees in the business
1-5
{
}
6-10 {
} 11-20 {
} Above 20 {
}
8. Age category of the business
0– 2 years {
} 3– 5 years {
} 6- 8 years {
63
} above 9 years {
}
SECTION 2: PRODUCT INNOVATION
1
2
3
4
Strongly
Agree
Agree
Statement
Uncertain
Strongly
Disagree
Disagree
On a scale of 1-5 Tick the appropriate alternative provided for each question with 5Strongly agree, 4- Agree, 3-Uncertain, 2-Disagree, 1- Strongly Disagree
New goods have been introduced in the business in the last 2yrs
1
The new good made us better than our competitors in the same
2 industry
The business specializes on goods that are most preferred by the
3 customers
Product innovation is part of the organization’s vision and
4 mission
The owner of the business allows communication within the
5 business for new ideas
The owner of the business allows communication within the
6 business for new ideas
Improving the quality of the products is one of the key objectives
7 of the organization
Product innovation is considered as means of achieving a firm’s
8 competitive advantage
Employees are rewarded for coming up with new product ideas
9 for improvement of existing products
Improving employee commitment , morale or both is part
10 of the product innovation strategy adopted by the firm
Employees are rewarded for coming up with new product
ideas for improvement of existing products
Kindly suggest ways through which the products produced by the organization can be
more appealing to the customers
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………
64
5
SECTION 3: PROCESS INNOVATION
1
1
2
3
4
2
3
4
Improving service quality through process innovation is one of
the key objectives of the organization
There has been cost reduction and efficiency in service delivery
after introduction of a new system
There are programmes to stimulate the creation of new ideas for
employees
New business methods are usually worth trying even though they
may prove risky and costly
There has been training on new computer based programmes in the
5 last 6 months
Smooth workflow through process innovation leads to customer
6 satisfaction
Introduction of new systems leads to better cash flows
7
There has been increased savings with introduction of proper
8 inventory management systems such as Just in time systems
There has been increase of sales after the organization introduce
9 new systems of workflow management
Technological changes within the organization have led to the
10 overall good performance of the organization
Suggest ways through which the organization can improve its processes
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………
65
Strongly
Agree
Agree
Statement
Uncertain
Strongly
Disagree
Disagree
On a scale of 1-5 Tick the appropriate alternative provided for each question with 5Strongly agree, 4- Agree, 3-Uncertain, 2-Disagree, 1- Strongly Disagree
5
SECTION 4: MARKET INNOVATION
1
2
3
4
Strongly
Agree
Agree
Statement
Uncertain
Strongly
Disagree
Disagree
Using a scale of 1 – 5 tick the appropriate answer from the alternatives provided for each
of the questions.1.Strongly Disagree 2. Disagree 3. Uncertain 4. Agree 5. Strongly
There is sufficient access to information on what the competition
1 is doing
The use of online tools and social media has helped the company
2 grow and attract new clients
A sound marketing strategy is important to the organization in the
3 long run
There are new opportunities of doing business that have been
4 identified by the business
Customers’ needs and preferences keep on changing
5
The business has changed its way of marketing in the last one year.
6
The prices offered by the business are lower than those of other
7 businesses in the same industry
The business researches on what customers want before they ask
8 for it
Goods/services produced by the business are considered unique
9 from other businesses.
Agree
Kindly suggest other ways through which the organization can improve its marketing
strategy
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
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………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………
66
5
SECTION 5: PERFORMANCE
1
2
3
4
Strongly
Agree
Agree
Statement
Uncertain
Strongly
Disagree
Disagree
Using a scale of 1 – 5 tick the appropriate answer from the alternatives provided for each
of the questions. 1. Strongly Disagree 2. Disagree 3. Uncertain 4. Agree 5. Strongly
Agree
Productivity of the organization improved in the last 2 years
1
The organization’s profitability has been on the rise for the last 5
2 years
There has been an increased sales turnover over the past 2 years
3
There has been an increase of market share of organizations for the
4 past 3years
The management is committed to sustainability and good
5 reputation in the long run
The firm’s performance is key to the employees of the
6 organization
Kindly suggest others ways through which the organization may Improve its overall
performance
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………........................................................................
................................................................................................................................................
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................................................................................................................................................
................................................................................................................................................
........................................................................
THANK YOU.
67
5
Appendix III: List of SMES
Name ofSME
1 100s ShopLtd
2 A one electronicsltd
3 Aanfra computersolutions
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
Industry/Sector
Retail
Import, wholesale ofelectronics
Sale of computer parts,accessories
&communications
FinancialSector
ICT
Generalmerchant
Stationary (Text Books) andM-pesa
Stationery -text books/M-pesa
Retail of laboratoryequipment
Hospitality/Hotel
RetailShop
ICT -Retail
Sale of musicproduction
Scrap metaldealers
RetailShop
stationary shop andprinters
Service -Consultancy
ICT
Petproducts
ICT
ICT
Services
Mediumtrader
ICT
Entertainment
GeneralRetail
RetailShop
RetailShop
Real Estate -Construction
ICT
Retail -Hardware
Education
Education
Services -Legal
LegalServices
Retail
ICT
ICT
Services - RealEstate
AAR AgentsServices
AbujaConnections
Active wearlimited
Actsenterprises
Actsenterprises
Afri laboratorysupplies
African TaiChi
AftermathematicsShops
AgoroPrinters
Air minister musicshop
Al moskoventures
AmazonShop
Anchor graphicsworks
Andy AdamsLtd
Anniversary EnterprisesShow
Aquanetiks giftshop
ArenaDstv
ArmetsComm.Enterprises
ArosConsultancy
Artbeads
AsaiComputers
Asanad MusicStudio
Ashallshop
Atete ElecLtd
Athens GeneralStore
Atlas Builders and PlumbersLtd
AuroraCommunications
Auto PlusSpare
Avenue 'De' OldTrafford
Avenue TechnologyCollege
Awiti and Sonscompany
Awiti and Sonscompany
A-zcollections
B N BCommunication
B4Connection
BaaguInvestments
68
40 Bahamas mens and women‟scollection
center
41 Baldesh EnterprisesShop
42 Balozi beauty care
43 Balozi Enterprises Shop
44 Baraka communications and electronics
45 Baraka Stores
46 Barcelona Stima Kinyozi
47 Baron Kinyozi and Salon
48 Batiana Enterprises
49 Beauty b services
50 Beauty beat cosmetics
51 Beauty city
52 Beauty point salon
53 Beauty Spot Studio
54 Ben electronics
55 Benru Barbers And Salon
56 Benwa african wear
57 Benwide general suppliers
58 Bereka hawkers point
59 Best 5 Outfitters
60 Best 5 Outfitters
61 Best Choice Ladies Fashions
62 Best image exhibition
63 Best Ladies Ltd
64 Besta Electronics Shop
65 Bestman cosmetics shop
66 Besty Cyber Café Pro
67 Bettys Club
68 Beva Boutique
69 Bhangwaji Communication
70 Big Five Enterprises
71 Big Sound Electronics
72 Bil Bella Hotel
73 Bill Nyong'o Dealers
74 Bima fashions
75 Bizz connections
76 Black House Shop
77 Blackman Enterprises
78 Bleach Salon and Kinyozi
79 Blessed Enterprises Library
80 blessing collection centre
81 Bliston enterprises
82 Blits Cyber And Training Ltd
83 Bliz Technologies
69
Retail - ClothLine
RetailShop
Wholesale of cosmetics
Services - Shoe Repair
Mobile accessories & electronics & Mpesa
Retail Shop
Services - beauty
Services - Beauty
ICT
Secretarial services
Beauty products & telephone accessories
Sale of cosmetics & sale of phones and
cards
Services
- beauty
Entertainment
Retail of radio and television & electronic
spares
Services - Beauty
Retail of cloth
Retail of stationery/ equity agent
Selling hawkers accessories toys, hairpieces
Retail
Retail
Retail, Cloths
Electronics mobile accessories
Retail - Beauty
ICT
Retail of cosmetics products/ storage
ICT
Hospitality/Hotel
Retail - Clothes
Entertainment
Retail
Retail - Entertainment
Hospitality/Hotel
Retail
Retail - Jewellery
Mobile phones and accessories/M-pesa
Retail
Artisan
Retail - Beauty
Education
Retail - Cloth Line
Retail of textiles
ICT
ICT
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
BlockEntertainment
Bloet MeterLtd
Blu EntertainmentLtd
Blue nile investment and trading company
limited
Blueberry artcompany
Bluehill investmentlimited
BM ElectronicsLtd
Bondeni EnterprisesLtd
Bonistar ComputersLtd
Boot CutSalon
Bottom linekiosk
Brand ZoneEnterprises
Branvicagencies
Bravo keycutters
BroderComputers
BrodersComputers
BrooklynHotel
Brothers ClothlineLtd
BrownseconCurio
Brysalexonn Electro Services &M-Pesa
Buffalo KoyaEnterprises
Bumper harvestltd
Busy LinkCommunication
Buzz EntertainmentLtd
C k gakuru &sons
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
C-112 ComputersLtd
CaféDeli
CaféDully
Cakeart
CamelRestaurant
CameraDealers
Camp davidelectronics
Candy landltd
Caprishop
Capterenterprises
Carlos Kinyozi andSalon
C-ComCommunication
ChachaInvestments
ChachaInvestments
ChanganyaEnterprises
Chania ShoeDealers
Channia transport co.Ltd
Chase collectionsltd
70
Retail -ICT
Electricals
Retail -ICT
M-pesa andcosmetics
Printing and stationeryshop
Stationery retail /supplies
Electricals
Retail
ICT
Services -Beauty
Retail
ICT
Printing andstationery
ServiceRetail
ICT
ICT
Hospitality/Hotel
Retail
Retail
Sale of electronics &M-pesa
Retail
Generalmerchants
ICT
Retail
General merchant shop and retailof
polythene bags andtailoring
ICT
Hospitality/Hotel
Hospitality/Hotel
Wedding cakes andservices
Hotel/Hospitality
Retail
Grocery and Mpesaservices
Confectionery and generaltraders
Generalmerchant
Small hardwareshop
Services -Beauty
ICT
RealEstate
Service - RealEstate
Retail
Retail
Courierservices
Sale of clothes/ shoes andstorage
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
cheershotel
Cheershotel
ChelseaKinyozi
Chez Baleke EnterprisesLtd
Chirashop
ChronicPictures
Cilas enterprisesltd
Classic BusesServices
Classic DataServices
ClassicLibrary
Cleatech communication &accessories
Click Dstv & EnterprisesShow
ClickzKinyozi
Club VegasEnterprises
CoachBarbers
Cocorido PlasticDealers
Cocorido plasticdealers
Combostore
Comlinkinvesments
Communicationsolutions
Coner Exhibition
Connectors ComputerEnterprises
Conta NetCyber
Control fire systemslimited
151 Coptex
152 Copy CatLtd
153 Corner polytheneshop
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
CornerShop
CreativeArts
Crewshotel
Crown BusLtd
Cumakiproductions
Curtain CentreLimited
Curtain CentreLimited
Cyber ZoneLtd
CybernetLtd
D & D ShoeMakers
D & D Shoe MakersLtd
D mcosmetics
D Max EnterprisesLtd
DaidooWear
Daily domesticltd
Daima SuperStores
71
Retail -Hotel/Hospitality
Hotel/Hospitality
Services -beauty
Retail
Retail
Services
Generalsupplies
Transport
ICT
Education
Mobile accessories M-pesaservices
ICT /Entertainment
Services -Beauty
Hospitality/Hotel
Services -Beauty
Retail
Retail
Mini shop &M-pesa
Mpesa/computer services &photocopying
ICT
Retail
ICT
ICT
Supply & installation of fire alarm&
securitysystems
Wholesale and retail of textilegarments
ICT
Retail of polythene bags, photocopy
services &soda
Retail
Retail
Hotel/Hospitality
Transport
Musicshop
Retail
Retail
ICT
ICT
Retail
Retail
Retail of Cosmetics and M-pesaservices
ICT
Retail
Retail of house holdutensils
Retail
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
Dallasshop
Damsolo musicwork
Dan Electronics and RepairShop
Danny MusicShop
Daves corner electricalsltd
Debbie HairSaloon
Delighttechnology
Delighttwechnology
Delta EnterprisesLtd
DeltaHotel
Demco ComputerServices
Deno SuperShop
Deos Carwash
Depeniel links enterpriseltd
Destiny CyberCafé
Dexter GeneralMerchants
Dexter GeneralMerchants
DickInvestments
Digital communicationsolution
DigitalShop
Digoemporium
Dilan EnterprisesLtd
Diligent leathershoes
Dimtech SoundsLtd
Dipkatex
DisneyLibrary
Dolphin cellularservices
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
Dong Fang CurtainsLtd
Downtown StereoLtd
Dubz EntertainmentLtd
Dunsactextiles
Dupli DrycleanersLtd
E3 CyberLtd
Eagle wholesalersltd
Easlis EnterprisesCenter
East african studios (2004) kltd
EclipseLtd
e-Kom CyberLtd
El Shadai CurioShop
Eldo Investments1995
Elimatt distributors
Elimatt distributors
E-ManambaAgency
Retail
Music editing andprogramming
ICT
Entertainment
Retail of electricals / equityagency
Services -beauty
Mobile andaccessories
Retail shop, mobile andM-pesa
Retail
Hotel/Hospitality
ICT
Retail
Services
Stationery & printingpapers
ICT
Retail
Retail
Services - RealEstate
ICT
Retail
Bicycle dealer s&spares
Retail
Retail
Retail
General trader shop and retailservices
Retail
Phone & beautyaccessories/Mpesa
services
Retail
Entertainment
Entertainment
Retail of textilematerials
Service
ICT
Wholesale & retail of readymadegarments
Retail
Photo-stidio, photoprocessing &retail
Services
ICT
Retail
Retail
SmallHardware
Supplies of generalhardware
Transport
72
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
Emirates SegaExhibition
Ernestmburu
Esetoric CyberLtd
Esko polythenecentre
Eunice njeri t/ahigh powerinvestments
Eureka fish $chips
Executive CytzBarbers
Expressgarments
Eye worldltd
Fast cardpoint
FedhaBookshop
Feliwama cybercafe
Fine glassmerchants
Finstar enterpriselimited
Five startailors
FloridaClubs
Franiza clothing &materials
Fresh ButcheryLtd
Friendlyexbitions
G&RRestaurant
G2shop
G3 communicationcentre
Gachoka Shoedealers
Galileomotel
Gatukuyu One-StopShop
Gawa cosmeticsshop
Gawa cosmeticsshop
Gemdipwears
Generationinsight
GigiEnterprise
GikombaDesigners
Gikomba textile Shop
Gikosh ChomaZone
Glass craftlimited
GloDressmakers
Gobsswholesalers
Gondalwallatrading
Good hope shoescentre
Gor TailoringShop
GraceShop
Grace wangui itotia t/a wa-mathaai
hawkerspride
Grace
wangui wa - mathaai hawkerspride
Grand destiny companyltd
Gravity trading co.Limited
73
Retail
Sodadistributor
ICT
Wholesale and retail of packagingbags
Hawkersware
Hotel/Hospitality
Services -Beauty
Mediumtrader
Ophthalmic & dispensingopticians
Retail of greetingcards
Retail
Cybercafe
Retail of glass andmirrors
Retail of house-hold & electricalgoods
Retail oftextiles
Hospitality/Hotel
Retail of new clothes, telephoneservices
Retail -Hotel/Hospitality
Boutique
Hospitality/Hotel
GeneralRetail
ICT
Retail
Hotel/Hospitality
Retail -Curio
Wholesale & retail ofcosmetics
Wholesale & retail ofcosmetics
Wholesale /retail of readymade garmentstravelling goodsshoes
Stationery
andM-pesa
Retail
Services
Retail
Hotel/Hospitality
Retail householdgoods
Services
Wholesale ofgarments
Hardware, glass, Stationery andgraphic
materials
Retail - ClothLine
Retail
Retail
Hawkersgoods
Hawkersware
Selling of MusicAccessories/Mpesa
Retail of sundries andhardware
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
GreenHotel
Green seasenterprises
Green seasenterprises
Habesha HotelLtd
Handson CyberCafé
Hari pharm pharmacyltd
high rise foodstuffs
High view opticalcentre
Hillside Traders1998
Homa HillsStores
Home BaseEnterprises
Homeboizcuts
Homeboizsounds
Idris enterprisesltd
Iftinelectricals
ImaxEntertainment
Imenti shoes collectionscentre
Intel MpesaLimited
Intensive printing worksltd
Internet cyberone
Isotech interconnectionsltd
Isotech interconnectionsltd
Italian WearLtd
JabaliEnterprises
Jackscommunications
Jackys HairSalon
Jagi venturesltd
JakomCarpenters
Jamia Mall CentralHotel
Jasperrose
Jaylin storesltd
Jessicainternational
Jiranipharmacy
Jitegemeeenterprises
JK VisionLtd
Joe MiniPub
JomwamuInvestments
Joncytextiles
Jopea GeneralPrinters
Joseph machariangonyi
Josrickmerchants
Jowaka beautysalon
JoySupermarket
Judys Shoedealers
Hotel/Hospitality
Wines and spiritwholesalers
Generalshop
Hospitality/Hotel
ICT
Dispensingchemist
Hotel/Hospitality
Optician
Retail
Retail
ICT
Services -beauty
Retail -Entertainment
Retail of watches & electronicsrepair
Electricals
Entertainment
Retail -Shoes
ICT -Retail
Small printing &stationery
Cyber cafe and cyberbureau
Mobile accessories-Mpesa
Mobile accessories & Mpesaservices
Retail
Retail
Retail shop & mobilecharging
Services -beauty
Supermarket
Retail
Hospitality/Hotel
Mobile accessories andMpesa
Dealers in suiting materials andaccessories
Import of stationery &wholesale
Chemist
Sale of second hand clothes &shoes
Electronics retail andwholesale
Hotel/Hospitality
Service - RealEstate
Tailoring materials andaccessories
ICT
Sale of second hand clothes andshoes
Generalsupplies
Salon & Kinyozi/Massage
Retail
Retail
74
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
337
338
339
340
341
342
343
344
Julius wanjohi maina
Kabete Stores
Kabul Barber Shop
Kagochi spot shop
Kagwanja emporium
Kak & q stationery
Kama General Traders
Kamusinga Shop
Kanyi Electricals
Kassangas Music Shop and Studio
Kausik & co ltd
Kayaba one shop
K-Chick Fast Food Ltd
Keen Merchandisers
Kenya toner & ink suppliers
Kerioka hotel
Ketan emporium.
Keylink distributors
Khoja telecoms
Kiambu Traders Limited
Kibe Kiosk
Kibrose school uniforms
Kichewa trading agencies
Kigen Mini Shop
Kigutha music store
KiKi and Sons limited
Kimani Hardware
Kinjos‟ saloon
Kinyua Agents
Kioko Shoe Palace
KIPs Hotel
Kisumu Ndogo Shop
Kiwi communication ltd
Kk shoes collection centre
Kobonyo Carpenters
Kogello fashions
Koinange Traders
Krish trading co.
Krish trading co. Ltd
Krish trading company
Krish trading company
Kushna General Merchants
Kwa Njenga Super stores
Kwa njeri Grocers
General merchant
Retail
Hotel/Hospitality
Retail shop & Mpesa
Retail of textile
Stationery & M-pesa services
Retail
Retail shop with Mpesa
Retail
Entertainment
Wholesale retail of textiles and accessories
Retail shop, stationery & Mpesa
Hospitality/Hotel
Beauty products
Retail of stationery
Hotel/Hospitality
General merchants
Imports wholesale and retail of tailoring
accessories
& storage
Mobile
phones,
accessories & Mpesa
Retail
Retail
Readymade clothing & tailoring
Import and retail
Retail
Music shop & duplicating
Services - Legal
Retail
Services - beauty
Real Estate
Retail
Hospitality/Hotel
Retail
Mpesa & sale of CDs &electrical items
Retail
Retail
Retail - Cloth Line
Retail
General merchants
General merchants
Retail general merchants
General retail merchants
Retail
Retail
Retail
75
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360
361
362
363
364
365
366
367
368
369
370
371
372
373
374
375
376
377
378
379
380
381
382
383
384
385
386
387
388
Lamini emporium
Lexus auto spares
Lions Den Bar
Livingcos (k) limited
M ismail and bros
Magnum africa ltd
Maguna Andu fashions
Maharshi stationers ltd
Mahmuds Shoes Collection Ltd
Makro communications
Mama brian shoes collection
Mama Dave Investments
Mama Evon grocery
Mama Kevo Shop
Manfreco ltd
Manorath office supplies
Mara creations
Marina Restaurant
Marinoz enterprises
Maruti and Sons Limited
Matunda shop
Matuu Enterprises
Mbaitu designers
Mboya Printers
Mibisco ltd
Mikes Electronics
Milano Cloth Line
Milimani fitting shop
Milineum fashions
Mirror sew -knit parts
Mlembe hotel
Mobile friendly
Mocca Café
Moha Traders
Mojos Bar and Reaustarant
Monica nyanjau ndungu
Muhoro electronics & boutique
Multi - trade investments (e.a) co. Ltd
Multi tools (k) ltd
Munis Computers Ltd
Musyi fashioners
Mutaro pub
Mututho Wines and Spirit
Mvinyo centre
76
General merchants/agrochemicals
Retail of motor vehicles spares
Hotel/Hospitality
Wholesale retail cosmetics
Retail stationery and electronics
Sale of motor bikes and spare parts
Retail - Cloth Line
Medium trader- stationers
Retail
Mpesa/ mobile accessories
Retail
Retail
Retail
Retail
Small trader-wholesaler
Medium general supplies
Selling of beads and textiles
Hotel/Hospitality
Cyber cafe
Services - Legal
Retail
Retail
Services - Cloth Repair
ICT
Medium grocery
Retail
Retail
Retail
Retail - Cloth Line
Retail of sewing and knitting and raw
material
s of imitation jewellery
Hotel/Hospitality
Mobile phones and accessories
Hospitality/Hotel
Retail
Hospitality/Hotel
Small shop and M-pesa
Electronics boutique
Selling commodities
Retail of hardware items
ICT
Retail
Hotel/Hospitality
Hotel/Hospitality
Wholesale & retail of mobile phones &
389
390
391
392
393
394
395
396
397
398
399
400
401
402
403
404
405
406
407
408
409
410
411
412
413
414
415
416
417
418
419
420
421
422
423
424
425
426
427
428
429
430
431
accessories, calling cards, electronics,
electrical / M-pesa
Retail
Retail
Hotel/Hospitality
Hotel/Hospitality
Retail
Retail
Retail - Cloth Line
Retail
Retail and wholesale of readymade
garments
Retail
- Cloth Line
Foot wear
Retail hawkers items
M-pesa services/photocopy
Retail - Cloth Line
Wholesale
Bookshop
Retail
Retail
Hotel/Hospitality
Retail
Hospitality/Hotel
Retail
Retail
ICT
Retail of picture frames/tailoring
Services
Supply of stationery
Retail
Mpesa, snack and mobile phone accessories
Services - beauty
Retail - Curio
Shop
Retail opticians - optics
Tailoring and readymade garments
Hospitality/Hotel
Retail of new automobile spares, motor cars,
batteries
accessories lubricants
Retail of &
foodstuff
Retail
ATM services
Hospitality/Hotel
Tailoring
Retail - ICT
Retail
Mwangaza Solar Ltd
Mwangi‟ centre
Mwathi milk bar
Mwauras Wines and Spirit
Mwenda Pole Wholesalers
Mwenda Spares and Hardware
Mwireri fashions
Naks Merchants Ltd
Naran's
Naxs fashion centre
Ndathe bata stokist
New faith beauty cosmetics
Neypart communications ltd
Ngumba fashions
Nitin wholesalers ltd
Njambas book centre
Njeru and Sons Stores
Njonje Enterprises
Njuguna place Restaurant
Njugunas Genaral Shop
Noma Restaurant Ltd
Nyanza furniture centre
Nyeri HardWare
Omi Business solutions
Omulembe enterprises
Opipi Car Wash
Optiven enterprises
Otis Furniture Palace
Overt services
Pablo Barber Shop
Pamba Traders
Pamoja enterprises ltd
Paradise eye care
Partex enterprises
Pasaras Restaurant
Patel auto mobile house ltd
Pauldon limited
Pepe Enterprises
Pesa point ltd-river rd
Petma Hotel
Petty designs
PhoneXpress Ltd
Polo Traders
77
432
433
434
435
436
437
438
439
440
441
442
443
444
445
446
447
448
449
450
451
452
453
454
455
456
457
458
459
460
461
462
463
464
465
466
467
468
469
470
471
472
473
474
475
Ponamu ventures ltd
Popo Kiosk
Pot Restaurant
Precious Furnishings ltd
Premier trading company ltd
Premier Trading Company Ltd
Prince uniforms
Prince wears
Profile kenya ltd
Pronto Restaurant Ltd
P-Unit Designers
Raj ushanga house ltd
Ranalo Hotel
Red Tape Enterprises
Regent book supplies (e.a)
Ridhdhi (e.a) limited
Rivercorp Holdings Ltd
Riverside communications
Rohi textiles
Roms communication
Roselyn packs
Rwathia butchery
Samuna enterprises systems
San liam (k) ltd
Sarahs beauty ware house
Satisfiers drinks
Seasons Bar and Restaurant
Sebarchy logistics
Sewtech (k) limited
Sew-tech (kenya) ltd
Shah Electronics
Shammah graphics & stationers
Shaneva stockist
Shayna cosmetics ltd
Shephereds shoes centre
Shethia wholesalers
Shiko Pub
Shira Fashions
Sighr Hardware Ltd
Sir Henrys Ltd
Sizzlin Hotel
Soft and fair cosmetic
Sonata Ltd
Sovee limited
Retail of electronics/Mpesa/Photocopy
Retail
Hotel/Hospitality
Retail
Whole sale retail of general merchant
/motor
Generalbikes/bicycles/sewing
merchandise motor bike, sewing
machine/electrical
appliances
machine,
electrical
appliances
Relining &
tailoring
uniforms
Dealers in textiles
Retail shop
Hospitality/Hotel
Retail - Cloths
Import/wholesale/retail medium trader shop
Hospitality/Hotel
Retail
Suppliers of text books
Import wholesale of Massai Beads Shukas
Wire Textile
Retail
Computer & telephone services and courier
serviceservices
agent
Retail
Mobile Phones Repair And Mpesa
Stephen polythene
Hotel/Hospitality
Buying & selling of stationery, text books
Belts retail and wholesale
Cosmetics products
Retail - Hotel/Hospitality
Hotel/Hospitality
Storage
Sales and service of sewing machines
Sales & services of sewing machines
Electronics
Small computer printing
Gift goods (storage)
Sale of cosmetics
Retail
Wholesale and retail trade of garment shoes
and general merchant
Hotel/Hospitality
Retail - Cloths
Retail - merchandize
Retail Shop
Hospitality/Hotel
Retail of cosmetics & mpesa
Service - Consultancy
Trading in agricultural equipments,
generators, water pumps and hardware
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515
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519
Sowaki electricals
Spurtech enterprises
Starwest technologies limited
Stewan computer garage ltd
Strategic mobile ltd
Style and glamoure ltd
Subukia furniture‟s
Supercuts Kinyozi
Supreme Consultants Ltd
Sure pharma ltd
Tasneem stores ltd
Tea Room Hotel
Telemon communication
Tell tell
Tevan enterprises
Texkim agencies
The music makers
The Tree Hotel
Thika Wholesalers
Thome collection centre
Tims Fashions
Top achievers bookshop
Topknit sewing
Toto Shoe Place
Touchline agencies ltd
Touchline agencies ltd
Tracejack limited
Treadstone ventures ltd
Tribeka Bar and Restaurant
Tribute Salon and Kinyozi Ltd
Trust opticians
Turtle wines and spirits
Uniform distrubutors ltd
Upper Hill Traders Limited
Urembo centre ltd
Ushanga ltd
Vabene couture
Vaghela men's wear ltd
Vic agencies limited
VICs furniture Ltd
Vineyard communications
Vinyl Shah Curios
Waamu Investments
Waciru beaty point saloon
Electricals
Toys shop
Mpesa services and spare parts
Sales & repair of second hand computers
Retail of mobile accessories/ Mpesa
General merchant and M-pesa
Retail
Services - beauty
Services - Consultancy
Retail of pharmacy Mpesa
Wholesale and retail of textiles
Hotel/Hospitality
M-Pesa , sale of scratch cards
Retail and wholesale of hardware and
general
merchandise
Retail hawkers
items
Mobile accessories/M-pesa services
Small music studio
Hotel/Hospitality
Retail
Retail - Cloth Line
Retail
Bookshop and storage
Retail of sewing machines and textiles
commodities
Retail
Safaricom airtime and mpesa
Mobile phone, accessories & M-pesa
Sale of CD-Rs, audio tapes and general
supplies& export
Import
Hospitality/Hotel
Services - Beauty
Selling spectacles frames, lenses &
accessories
Sale of wines and spirits/storage
Wholesalers/retailers/general
Retail
Retail of beauty care products
General merchant and storage
Retail of clothes
Tailoring and readymade garments
Wholesale & retail of general items
Retail
M - pesa, scratch cards, photocopy &
mobile- accessories
Retail
Curio
Service - Real Estate
Services - beauty
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521
522
523
524
525
526
527
528
529
530
531
532
533
534
Waciru retail Outlet
Wajane Kiosk
Wakamundu Hotel
Wakianda studio
Walisper communication centre
Walkers cafes
Wananchi optical goods
Wanjala Cloths and Fittings
Warui Mini Mart
White rose drycleaners ltd
Wireless communication
Worth foto studio
Yag general suppliers
Zanze Bar and Restaurant
Zolar enterprises
Retail - merchandize
Retail
Hotel/Hospitality
Retail - Entertainment
ICT
Hotel/Hospitality
Optician
Retail
Retail
Spare parts
General merchant
Photographic shop
Suppliers of stationery
Hotel/Hospitality
Stall management office
Nairobi County Business LicensingDepartment 2015
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