Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

Innovation Strategy and Performance of Manufacturing

Small and Medium Enterprises in Kenya
1
Idi Ochieng Juma Masoud ; 2 Dr. Joseph Ndururi, PhD ; 3 Dr. Jane Omwenga, PhD
1
PhD Student, Jomo Kenyatta University of Agriculture and Technology
2
Lecturer, Jomo Kenyatta University of Agriculture and Technology
3
Lecturer, Jomo Kenyatta University of Agriculture and Technology

Abstract:- This study sought to examine the role of I. INTRODUCTION

innovation strategy on performance of SMEs in Kenya. The
study applied Innovation theory. The population of the Innovation involves transforming new ideas into new
study was manufacturing SMEs in Nairobi City County, processes and products (Jiménez-Jiménez & Sanz-Valle, 2011).
Kenya since Nairobi is a cosmopolitan that is home to Organizations pursue innovation to enhance efficiency and
several manufacturing SMEs. The target population productivity, boost market share and profitability, and create
comprised 538 manufacturing SMEs located in Nairobi City economic value for their stakeholders (Baierle, Benitez, Nara,
County, Kenya. The study focused on top managers as they Schaefer, & Sellitto, 2020). Chege, Wang, and Suntu (2020)
primarily handle strategic management issues within assert that organizations adopt innovations to respond to
organizations. Stratified sampling was employed to select environmental changes and fulfill strategic goals aimed at
the sample, with the population stratified based on sectors sustaining and enhancing performance.
as categorized by the Kenya Manufacturers Association
(KMA). The research was underpinned by the positivism Innovation is a holistic strategy aimed at renewing and
philosophy, aiming for an objective understanding of the expanding a company's range of products, services, and markets
relationship between innovation strategy implementation by implementing new methods or altering existing ones
and the competitive performance of manufacturing SMEs (Shqipe, Gadaf, & Veland, 2013). It entails a significant
in Kenya. A cross-sectional survey design was utilized to transformation, accelerating the generation of ideas and the
achieve this objective, integrating both qualitative and development of new products, services, and industrial processes
quantitative mixed methods. Data collection was carried out (Pisano, 2015). Alrowwad and Abualoush (2020) argue that
through the administration of a questionnaire, following a innovation encompasses the creation of ideas and their
pilot study to ensure the validity and reliability of the implementation. Key drivers of innovative activities include
research instruments. The Statistical Package for Social technological facilities, a skilled workforce, and management
Sciences (SPSS) version 25 software was utilized for data support. High technical innovation performance necessitates
analysis. Qualitative data was subjected to thematic analysis adaptability and results from an organization's ability to adjust
and presented in prose form, while quantitative data its processes and products in response to environmental
underwent descriptive statistical analysis and was presented changes (Abu Baker & Ahmad, 2010). The development of
using tables and figures. The study also computed cutting-edge technologies and new products requires
correlation and regression analysis to test the relationship organizations to adopt practices that encourage creativity,
between study variables and test the research hypothesis. flexibility, and experimentation (Das & Joshi, 2011).
The study also concludes that innovation strategy has a
positive and significant effect on the performance of Hilman and Kaliappen (2015) categorize organizational
manufacturing SMEs in Kenya. The study revealed that innovation into three dimensions: environmental (external,
new products, new markets, and product development contextual), organizational (structure, culture), and managerial
influence the performance of manufacturing SMEs in (leadership, human capital). Innovation is widely acknowledged
Kenya. This implies that improving innovation strategy as a pivotal factor for augmenting productivity and
(new products, new markets, and product development) competitiveness. It serves as a cornerstone for the survival and
would improve manufacturing SMEs' performance in competitiveness of companies in a globalized marketplace
Kenya. This study, therefore, recommends that the (Sheu, 2017; Kiraka, Kobia, & Katwalo, 2020; Lin & Chen,
management of manufacturing SMEs in Kenya should 2020). Within the realm of business, innovation is frequently
promote an innovative work environment regarded as the bedrock for strategic transformation,
empowering firms to attain and uphold a competitive advantage
Keywords:- Innovation Strategy, Performance of SMEs in (Cui, Ye, Teo, & Li, 2015).
Kenya, Innovation Theory.

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

The successful implementation of strategies is crucial for their larger counterparts to possess a business website
any organization (Tan, 2004). The process of executing an supporting online transactions, and merely one-third as likely to
innovation strategy determines whether an organization thrives, utilize Enterprise Resource Planning (ERP) systems, which
survives, or fails (Barnat, 2012). As a vital component of streamline core business processes in real-time (OECD, 2017).
corporate strategies, innovation enables firms to differentiate Highlighting the significance of innovation, a study conducted
their products, enhance efficiency, enter new markets, and by the Kenya Association of Manufacturers (KAM, 2020)
increase market share to build competitiveness (Blind, Pohlisch, underscores that the presence of novel ideas, inventions, and
& Rainville, 2020). Even the most well-crafted strategy will not adaptations serves as pivotal indicators of growth and
impact an organization if it is not effectively implemented performance within SMEs.
(Candy & Gordon, 2011). Therefore, a meticulously developed
strategic plan must be paired with effective implementation to  Statement of the Problem
truly benefit the organization (Cui et al., 2015). Innovative high-technology SMEs have become a crucial
factor in the success of modern economies, competing on a
Small and Medium Enterprises (SMEs) are widely global scale despite having limited resources (Abu Amuna et
acknowledged as catalysts for global economic growth (Etriya, al., 2019). Innovation enables companies to navigate external
Omta, Scholten, & Wubben, 2020). They play a crucial role in environmental turbulence, making it a key driver of long-term
socio-economic development and competitiveness, thanks to business success, especially in dynamic markets (Vushe, 2021).
their diverse contributions to the economy (Sahut & Peris-Ortiz, Research on SMEs has consistently considered the resource
2014). SMEs generate substantial income and employment, constraints these firms face and the impact of these limitations
create opportunities for the development and adoption of on their performance and growth (Sahut & Peris-Ortiz, 2014).
appropriate technologies, and serve as significant sources of
innovation (Ho, Nguyen, Adhikari, Miles, & Bonney, 2018; The economic blueprint of Kenya Vision 2030 places
Shiu & Walker, 2007; Subrahmanya, Mathirajan, & paramount importance on the manufacturing sector as a
Krishnaswamy, 2010). linchpin for the nation's developmental aspirations and
accelerated economic growth (Kenyan Industrial SMEs Cluster
Small and medium enterprises (SMEs) play a vital role in Mapping Report, 2021). This sector holds considerable
the development of many African countries. Often, SMEs significance, contributing 7.7% to the gross domestic product
emerge due to decreasing job security in large corporations and (GDP) in 2018 (KAM, 2020). In 2019, the Kenya Association
the public sector, as well as rising education levels and of Manufacturers launched the Manufacturing Priority Agenda
innovation. SMEs tend to flourish when a country's economy is (MPA) as an integral component of its advocacy agenda aimed
struggling, as public sector employment contracts (Masocha, at supporting Kenya in realizing its manufacturing goals
Zindiye, & Chiliya, 2012). Conversely, when the economy is outlined in the Big Four Agenda. The MPA is structured around
strong, SMEs benefit from easier access to credit and improved five key pillars: enhancing competitiveness, expanding market
infrastructure, according to the International Finance access, fortifying the institutional framework, facilitating
Corporation (IFC, 2011). In Kenya, SMEs are active across all government-led SME development, and safeguarding the future
economic sectors and are crucial for employment, income trajectory of the manufacturing sector (KAM, 2022).
generation, and poverty reduction (GOK, 2020). They account
for 98% of all businesses in the country, contributing Innovativeness in SMEs signifies a willingness to embrace
approximately 25% of GDP and 50% of formal employment, innovative ideas, experimentation, and creative processes,
with an annual employment growth rate of 12-14% (MOIED, moving away from traditional practices and technologies
2020; KNBS, 2019). Over the years, the sector has been (Abouzeedan, 2011). The significance of an innovation strategy
recognized for its significant role in providing goods and for small firms lies in its role as the most critical factor in
services, fostering competition and innovation, generating predicting their performance (Al Mamun et al., 2019). A 2017
employment, and alleviating poverty (KAM, 2021). OECD survey revealed that, on average, SMEs are less
innovative than larger companies. For instance, the median
Innovation stands as a cornerstone for the growth and national SME share of business R&D in OECD countries is
success of small and medium enterprises (SMEs) globally, 35%.
bolstering their competitive edge (Alrowwad & Abualoush,
2020). Nonetheless, the extent to which SMEs embrace Additionally, SMEs are significantly less likely than large
innovation varies across different regions. A survey conducted firms to possess a business website enabling online ordering,
by the Organization for Economic Co-operation and and they are only about one-third as likely to utilize Enterprise
Development (OECD) in 2017 unveiled that, on average, SMEs Resource Planning (ERP) systems, which integrate core
exhibit lower levels of innovation compared to larger business processes in real-time (OECD, 2017). Despite the
corporations. In OECD nations, the median national share of adoption of innovation by manufacturing SMEs, studies
business R&D within SMEs stands at 35%. Moreover, small indicate that they have not fully capitalized on its benefits. For
firms with 10-49 employees are approximately half as likely as instance, the World Bank Kenya Economic Outlook report

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

(2020) highlights growth stagnation in the sector, partly simultaneously; rather, it unfolds as a process, with some
attributed to low overall productivity and significant efficiency individuals displaying greater readiness and willingness to
disparities among firms, allowing uncompetitive companies to adopt the innovation than others.
persist in the market.
The theory emphasizes that individuals who embrace an
Most empirical studies examining the relationship innovation early or later possess distinct characteristics.
between innovation and performance consistently demonstrate Understanding the traits of the target population is crucial when
a positive correlation (Ho et al., 2018; Kadosca, 2016; Kiraka, promoting an innovation (Maryann, 2014). According to
2019; Mensah & Acquah, 2020). However, as highlighted by Rogers (2003), there are five categories based on the
Simpson et al. (2016), innovation is a costly and risky characteristics of the target population: innovators, early
endeavor, with potential positive outcomes on firm adopters, late adopters, late majority, and laggards. Innovators
performance, but also risks such as increased market exposure, are typically adventurous and inclined to take risks by trying
higher costs, employee dissatisfaction, or unforeseen out new innovations; they require minimal persuasion to adopt
disruptions. Despite these insights, there remains a notable gap an innovation.
in the literature concerning the impact of innovation strategy
implementation on the performance of manufacturing SMEs in Early adopters serve as opinion leaders and are open to
Kenya. embracing changes. The early majority adopts ideas more
quickly than the average individual, although they typically do
 General Objective not take on leadership roles. Late majority individuals are
To examine the relationship between innovation strategy generally skeptical of change and only accept an innovation
and performance of manufacturing SMEs in Kenya. once the majority has endorsed it. Laggards are deeply rooted in
tradition and are resistant to adopting innovations (Renana &
II. THEORETICAL FRAMEWORK Eitan, 2019). A person's willingness to adopt a technological
innovation is influenced by four factors: awareness of the
 Theory of Innovation innovation's significance, their decision-making process, initial
The theory of innovation, also known as the diffusion of usage of the innovation, and sustained utilization over time.
innovation theory, elucidates how developments gain
momentum and gradually spread throughout a specific group of The theory can significantly impact the innovation
individuals. Introduced by Rogers in 2003, this theory utilizes strategies pursued by small and medium manufacturing
communication as a fundamental concept to elucidate the enterprises in Kenya to attain a competitive edge. The
process through which advancements propagate. These effectiveness of adopting an idea or product hinges on their
advancements may manifest as new products, ideas, behaviors, comprehension of the target population and the factors that
or technologies. The theory aims to delineate the journey of shape their adoption rates (Yusr, 2016). Small and medium
technological innovations from their conceptualization to enterprises must embrace new innovation strategies, structures,
eventual adoption. The desired outcome is the acceptance and learning methodologies, and adapt to changes that seamlessly
incorporation of the product or idea within a social system disseminate and integrate into the social system.
(Zhou & Li, 2011). However, adoption does not occur

III. CONCEPTUAL FRAMEWORK

Fig 1 Conceptual Framework

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

 Innovation Strategy organizational innovation involves the implementation of novel

Organizational innovation, as described by Crema et al. organizational methods such as business practices, roles, and
(2014), pertains to enhancements in internal interactions within external relationships. Prajogo (2016) contends that product and
an organization. This encompasses improved collaboration process innovation are intertwined with an organization's
among different units, increased association and participation specific strategy, enabling firms to respond to market demand
among various interest groups, and the development of and capitalize on opportunities by leveraging their
networks within their environment. Baierle et al. (2020) organizational capabilities and competencies. Managers are
conceptualize organizational innovation as significant confronted with strategic decisions regarding the utilization of
alterations in routines, procedures, organizational structure, and new knowledge or technology to develop new products or
strategic orientation management. Innovation within opting for higher returns through more efficient production
organizations entails learning processes that foster the systems. This dilemma arises from the competition within the
cultivation of teamwork, knowledge, and skills, thereby firms' operational environment (Filipini & Martini, 2010).
facilitating adaptation to change and enhancing competitiveness
(Claver-Cortés, Zaragoza Sáez & González-Illescas, 2018). Innovation carries a positive connotation, representing a
practical concept with beneficial outcomes for both its creators
Fathema, Shannon, and Ross (2015) underscored the and adopters. Organizations engage in generating and adopting
importance of innovation strategies as crucial drivers for firm various types of innovations that are perceived as valuable for
performance, aiding in value creation and maintaining a achieving their short-term and long-term objectives, thereby
competitive edge in an increasingly volatile and rapidly enhancing operational efficiency and effectiveness. Advanced
evolving business landscape. The success of most firms heavily techniques play a pivotal role in improving performance across
relies on efficient operational processes, which are often many organizations, leading to increased productivity and
bolstered by investments in technologies that enhance internal market share growth (Chander et al., 2020).
efficiencies (Munyoroku, 2014). Consequently, technological
innovation strategies adopted by firms should focus on According to Kok and Beimans (2009), product
identifying and exploiting new revenue opportunities while innovation plays a crucial role in creating superior customer
enhancing customer satisfaction through reliable service value and contributes to overall firm performance. Process
delivery. These strategies involve the implementation of innovation, on the other hand, serves as a significant source of
systems such as Enterprise Resource Planning (ERP) systems, competitive and strategic advantages for firms, often remaining
which provide capabilities that support and streamline various hidden from competitors due to their internal nature within
production processes. Moreover, these systems should organizations (Maine et al., 2012). Prajogo (2016) suggests that
contribute to improving overall firm operations by automating firms focusing on process innovations may not prioritize
routine tasks such as order management (Valacich & Schneider, aggressive development of new products for markets. Instead,
2012). they may compete in established (mature) markets, where
strategies primarily revolve around producing and delivering
IV. EMPIRICAL REVIEW products to customers with enhanced value propositions such as
speed, flexibility, or cost-effectiveness (Klingenberg et al.,
 Innovation Strategy and Competitive Performance of SMEs 2013).
Organizational innovation, as defined by Crema et al.
(2014), encompasses enhancements in internal interactions Process innovations, such as the adoption of new process
within an organization. This includes fostering collaboration technology, can serve as strategic maneuvers for firms to
between different units, promoting association and participation elevate entry barriers for competitors, thereby safeguarding
among various interest groups, and cultivating networks within their market advantage (Porter, 1985). Marketing innovation,
their environment. Baierle et al. (2020) characterize it as a on the other hand, enables firms to address customer needs,
substantial shift in routines, procedures, organizational explore new markets, and position their products effectively, all
structure, and strategic orientation within management aimed at enhancing competitive advantage (Kiveu et al., 2019).
practices. Innovation within organizations entails learning According to ZuńigaCollazos and Castillo-Palacio (2016),
processes that stimulate the development of teamwork, innovative marketing strategies have the potential to enhance
knowledge, and skills, thereby facilitating adaptation to change customer satisfaction and improve the perception of a
and enhancing competitiveness (Claver-Cortés, Zaragoza Sáez company's products and services. Through marketing
& González-Illescas, 2018). innovation activities, firms can cater to both existing and new
markets while enhancing the image of their products and
Morente and Ferràs-Hernández (2017) posit that services. The extent of firms' engagement in marketing
organizational innovation encompasses various aspects innovation is influenced by their activities and the industry in
including innovation capacities, organizational culture, which they operate (Herman, Hady, & Arafah, 2018).
individual personality traits, leadership styles, creativity, and
entrepreneurship. According to the OECD (2018),

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

The competitive landscape confronting companies today  Research Design

differs significantly from the environment that shaped the In this study, a cross-sectional survey design was utilized,
concept of strategy fifty years ago (Cho & Lee, 2018). This which entails collecting data at a single point in time to address
rapid evolution of the strategy environment has led to the a research question (Sekeran & Roger, 2010). This approach
partial obsolescence of certain traditional strategy concepts, offers a snapshot of trends and is valuable for capturing the
such as industry structure analysis, while simultaneously current conditions, characteristics, and perspectives of the study
sparking numerous new insights (Narver, Slater, & population at a specific moment. It enables researchers to
MacLachlan, 2000). Indeed, this shifting context has prompted ascertain the frequency of specific attributes within a defined
the emergence of several new themes within the realm of population at a particular moment in time.
strategy, including foresight, knowledge, competencies,
coalitions, networks, extramarket competition, ecosystems,  Target Population
transformation, and renewal. In order to thrive in the "innovate Abowitz and Toole (2010) posited that the study
or die" milieu of the new economy, companies must develop a population is the entire universe of people or things from which
new strategy, which is of paramount importance for their the sample is selected. This study's target population was the
survival (Dedahanov et al., 2017). manufacturing SMEs who are members of the Kenya
Association of Manufacturers. According to KMA (2022), there
Effective management of innovation is a critical are 538 registered members of KMA.
component of corporate strategy, playing a pivotal role in a
company's competitive advantage (Kach et al., 2015). Table 1 Target Population
Consequently, the strategic management of innovation has Sector Population
emerged as a foundational concern within the field of strategic Agriculture sector/agro-processing 36
management. Innovation can manifest in various forms, Automotive 44
including new products or services, advancements in Building, mining, and construction 39
production process technology, novel organizational structures Chemical & allied 32
or administrative systems, and fresh plans or programs Energy, electrical and electronics 47
involving organizational members (Keupp et al., 2012). Food and beverages 101
Strategy, on the other hand, encompasses vital aspects of Leather and footwear 18
ensuring the entity's survival, ushering in new activities and Metal and allied 43
areas of interest, and addressing atypical challenges faced by Paper 25
the organization (Dogan, 2017).
Pharmaceutical and medical equipment 28
Plastics and rubber 14
In an era dominated by discontinuity, strategic innovation
is recognized as paramount for generating wealth and as the Textile and apparels sector 17
primary means to overcome resource constraints for new Timber 12
market entrants and sustain success (Massa & Tucci, 2013). Services and consultants 82
Amidst a turbulent economic landscape characterized by rapid 538
and radical changes, enterprises must possess the capability to Source: (Researcher, 2022)
pivot and engage in a different game. Crafting a distinctive
strategy necessitates a high level of innovation, proactivity,  Sampling Frame
calculated risk-taking, and thorough analysis of shifts in A sampling frame refers to a comprehensive list of all
customer preferences and competitor behaviors (Preda, 2013). individuals or units within a population from which a sample
Companies are urged to prioritize strategic innovation, which can be selected (Greener, 2008). As highlighted by Ng’ethe
encompasses and even transcends all dimensions of innovation, (2013), the sampling frame plays a crucial role in enabling
in order to foster sustainable growth (Dogan, 2017). researchers to draw an appropriate random sample, ensuring
that all members of the population of interest have an equal
V. RESEARCH METHODOLOGY opportunity to be included in the sample. For this study, the
sampling frame comprised a listing of all 538 manufacturing
 Research Philosophy SMEs situated in Nairobi City County, Kenya.
The study used a cross-sectional survey design to establish
the role of innovation strategy implementation on the  Sample Size
competitive performance of manufacturing SMEs in Kenya. A sample refers to a portion of the population under
The study also used both qualitative and quantitative mixed investigation (Patten & Newhart, 2017). In this study, the target
methods. population consisted of 538 manufacturing SMEs located in
Nairobi City County, Kenya. Given that strategic management
issues are primarily handled by top managers within
organizations, this group was specifically targeted. According
to Sekaran and Bougie (2010), a sample size ranging from

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

larger than 30 to less than 500 is deemed appropriate for most an initial understanding of the distribution of participant
research endeavors. Slovin’s formula (1960) will be applied as responses on these variables and to gauge their attitudes toward
illustrated: the measurement items. Moreover, a multiple regression model
was utilized to assess the significance of the predictor variables
n = N/ (1+Ne2), on the dependent variable. For example, Valipour et al. (2012)
Where; employed a regression model to explore the effects of cost
n = Sample Size leadership and product differentiation strategies on firm
N = Total Population performance in India. In the present study, the regression
e = Error of Tolerance with a confidence level of 95 % (giving analysis focused on elucidating how innovative organizational
a margin error of 0.05) structure, innovative organizational change, innovative
n = 538 / (1+ 538*0.05*0.05) = 229 organizational learning, and organizational innovation strategy
Hence, the sample size was 229. impact the performance of manufacturing SMEs in Kenya.

 Data Collection Instruments Descriptive statistics were presented using mean scores,
In this study, data collection was conducted using a where values between 1 and 2 indicated disagreement, a mean
questionnaire, which serves as a research instrument to uncover of 3 represented neutral responses, and scores falling between 4
individuals' experiences, thoughts, attitudes, and anticipations and 5 denoted agreement. Furthermore, the significance of the
of future events (Andres, 2012). The questionnaire comprised a independent variables was evaluated using the Fisher
combination of open-ended and closed-ended questions. This distribution test (F-test), with the overall significance of the
approach facilitated the swift gathering of extensive model assessed at a 5% confidence level. The strength of the
information (Abowitz & Toole, 2010), enabling data collection model was determined by examining the p-value. A conclusion
from a large and diverse group of respondents. was drawn based on the p-value, whereby a value less than 0.05
signified a significant overall model, while a p-value greater
 Pilot Study than 0.05 indicated an insignificant overall model.
A pilot study was undertaken to assess the validity and
reliability of the research instruments. As noted by Kothari VI. PRESENTATION, ANALYSIS, AND
(2004), conducting a pilot study of questionnaires before their INTERPRETATION OF DATA
actual use is advisable. This process helps to identify any
weaknesses in the questionnaires, and the insights gained can A. Descriptive Statistics Analysis
be leveraged to make improvements. Tayie (2005) recommends
using sample sizes of 25-50 for pretesting measurement  Innovation Strategy and Performance of Manufacturing
instruments. In this study, the pilot study involved 10% of the SMEs
population, resulting in a sample of 23 manufacturing SMEs The fourth specific objective of the study was to examine
located in Nairobi City County, selected from each sector. the role of innovation strategy on the performance of
manufacturing SMEs in Kenya. The respondents were
 Data Analysis and Presentation requested to indicate their level of agreement on various
Descriptive statistics, including means and standard statements relating to innovation strategy and performance of
deviations, were calculated for both the innovation strategy and manufacturing SMEs in Kenya. The results are presented in
performance measurement scales. This analysis aimed to offer Table 2.

Table 2: Innovation Strategy and Performance of Manufacturing SMEs

Mean Std. Deviation
We manage to cope with market demands and develop new products and services quickly 3.57 .88
We continuously modify design of our products and services and rapidly enter new markets 4.43 .84
Our firm manages to deliver special products/services flexibly according to customers’ orders. 3.83 .82
We continuously improve old products and services and raise quality of new products 4.54 .84
Development of new channels for products and services offered by our corporation is an on-going 4.65 .72
process.
We deal with customers’ suggestions or complaints urgently and with utmost care 4.53 .87
In marketing innovations (entering new markets, new pricing methods, new distribution methods, etc.) 4.5 .77
our company is better than competitors
Business departments understands the IT environment (e.g., its current and potential capabilities, systems, 4.48 .76
services, processes)
There is better coordination and integration of information flow and activities within and/or between firm 4.80 .84
boundaries

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165 https://doi.org/10.38124/ijisrt/IJISRT24MAY1876

Business managers understand the work environment of IT 4.48 .84

The organizational strategies are consistent with the other organization’s positions 4.25 .76
Aggregate 4.369 0.813

From the results, the respondents strongly agreed that continuously modifies design of our products and services and
there is better coordination and integration of information flow rapidly enters new markets (M=4.43, SD=0.84).
and activities within and between firm boundaries (M=4.80,
SD=0.72). In addition, the respondents strongly agreed that From the results, the respondents agreed that the
developing new channels for products and services offered by organizational strategies are consistent with the other
our corporation is an on-going process (M=4.65, SD=0.72). organization’s positions (M=4.25, SD=0.76). In addition, the
Further, the respondents strongly agreed that their firm respondents agreed that our firm delivers special
continuously improves old products and services and raises the products/services flexibly according to customers’ orders
quality of new products (M=4.54, SD=0.84). The respondents (M=3.83, SD=0.82). Further, the respondents agreed that the
also strongly agreed that they urgently deal with customers’ firm can quickly cope with market demands and develop new
suggestions or complaints and with utmost care (M=4.53, products and services (M=3.57, SD=0.88). The respondents
SD=0.87). also agreed that effective programs are in place to attract and
retain the best IT professionals with technical and business
The respondents strongly agreed that our company is skills (M=3.24, SD=0.95). The respondents agreed that
better than competitors in marketing innovations (entering new individuals are responsible for collecting, assembling and
markets, new pricing, and distribution methods) (M=4.50, distributing employees' suggestions internally (M=3.17,
SD=0.77). In addition, the respondents agreed that business SD=0.73).
departments understand the IT environment (e.g., its current
and potential capabilities, systems, services, processes)  Performance of Manufacturing SMEs in Kenya
(M=4.48, SD=0.76). Further, the respondents agreed that their The respondents were requested to indicate their level of
business managers understand the work environment of IT agreement on various statements relating to the performance of
(M=4.48, SD=0.84). The respondents also agreed that the firm manufacturing SMEs in Kenya. The results are presented in
Table 3.

Table 3: Performance of manufacturing SMEs in Kenya

Mean Std. Deviation

Our Total Profits (Total sales – Costs) have been increasing yearly 4.208 .905
The number of employees has been rising every year 4.136 .936
The volume of sales has been increasing ever yearly 4.318 .764
The geographical market size of our products has been expanding 4.214 .87
We are highly satisfied by the returns from assets invested (ROA) 4.045 .959
We are highly satisfied by the returns from borrowed money (ROE) 4.065 0.764
Number of customers satisfied by our products has been rising each year 4.377 .801
The size of our organization has been expanding for the last five years 4.253 .86
The quality of our products has improved considerably 4.344 .874
Aggregate 4.21 0.859

From the results, the respondents agreed that the number The respondents agreed that the geographical market size
of customers satisfied by our products has been rising each year of our products has been expanding (M=4.21, SD=0.87). In
(M=4.38, SD=0.801). In addition, the respondents agreed that addition, the respondents agreed that generally, the firm total
the quality of our products has improved considerably (M=4.34, Profits (Total sales – Costs) have been increasing yearly
SD=0.874). Further, the respondents agreed that the sales (M=4.21, SD=0.905). Further, the respondents agreed that the
volume has been increasing yearly (M=4.32, SD=0.764). The number of employees has increased yearly (M=4.14,
respondents also agreed that the organization's size has been SD=0.936). The respondents also agreed that the firm is highly
expanding for the last five years (M=4.25, SD=0.86). satisfied with the borrowed money returns (ROE) (M=4.07,
SD=0.764). The respondents also agreed that the firm is highly
satisfied by the returns from assets invested (ROA) (M=4.05,
SD=0.959).

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Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
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B. Correlation Analysis

Table 4: Correlation Coefficients

Variables (1) (2) (3) (4) (5)
(1) Performance of SMEs 1.000
(5) innovation strategy 0.683*** 0.818*** 0.858*** 0.874*** 1.000
*** p<0.01, ** p<0.05, * p<0.1

The analysis revealed a strong correlation between

innovation strategy and the performance of manufacturing Ho4: Innovation strategy has no significant role on performance
SMEs in Kenya (r = 0.683). This correlation was statistically of manufacturing SMEs in Kenya.
significant, with a p-value below the 1% significance level. A univariate analysis was conducted to scrutinize the null
These results are consistent with the findings of Minjeong and hypothesis. As per the model summary provided in Table 4.24,
Sungyong (2021), who also observed a highly significant the r-squared value for the relationship between organizational
correlation between organizational innovation strategy and the innovation strategy and the performance of manufacturing
performance of manufacturing SMEs. The study's conclusion SMEs in Kenya was determined to be 0.467. This signifies that,
emphasizes the pivotal role of formulating and executing a within a 95% confidence interval, approximately 46.7% of the
robust organizational innovation strategy in driving overall variation in the performance of manufacturing SMEs in Kenya
business performance, highlighting the strategic imperative of can be attributed to changes in organizational innovation
innovation for maintaining a competitive edge. strategy. Therefore, organizational innovation strategy has the
potential to account for 46.7% of the observed changes in the
 Test for Hypothesis Four performance of manufacturing SMEs in Kenya. Nevertheless,
The objective of the study was to find out innovation the remaining 53.3% variation in the performance of
strategy has no significant role on performance of manufacturing SMEs in Kenya suggests that other factors
manufacturing SMEs in Kenya. The corresponding hypothesis beyond organizational innovation strategy play a role in
was: explaining performance within this context.

Table 5: Model Summary for innovation strategy

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .683a .467 .464 5.12035
a. Predictors: (Constant), innovation strategy

The analysis of variance (ANOVA) was utilized to evaluate the adequacy of the regression model in fitting the data. Based on
the ANOVA findings presented in Table 4.5, it was observed that the Prob>F value of 0.000 was below the chosen significance level
of 0.05. This indicates that the model, as formulated, was indeed appropriate for predicting the performance of manufacturing SMEs
in Kenya. Furthermore, the calculated F-value obtained from the table (133.249) exceeded the critical F-value derived from the F-
distribution tables (3.924). This supports the conclusion that innovation strategy can effectively forecast the performance of
manufacturing SMEs in Kenya.

Table 6: ANOVA for Innovation strategy

Model Sum of Squares df Mean Square F Sig.

1 Regression 3493.522 1 3493.522 133.249 .000b
Residual 3985.134 152 26.218
Total 7478.656 153
a. Dependent Variable: Performance of manufacturing SMEs in Kenya
b. Predictors: (Constant), innovation strategy

From the results in table 6, the following regression model Upon conducting coefficient analysis, it was revealed that
was fitted. the constant exhibited a coefficient of 10.777. This suggests
Y = 0.142 + 0.411 X4 that if the innovation strategy were to remain constant at zero,
(X4 is Information Technology communication) the performance of manufacturing SMEs in Kenya would reach
10.777 units. Furthermore, the results indicated that the

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 Volume 9, Issue 5, May – 2024 International Journal of Innovative Science and Research Technology
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coefficient for organizational innovation strategy stood at predetermined significance level of 0.05. This signifies that the
0.635. This implies that a one-unit increase in organizational innovation strategy holds statistical significance.
innovation strategy would result in a 0.635-unit enhancement in
the performance of manufacturing SMEs in Kenya. Based on these findings, the study rejected the null
Remarkably, the p-value for organizational innovation strategy hypothesis and accepted the alternative hypothesis, concluding
was determined to be 0.000, which falls below the that innovation strategy has a positive and significant influence
on the performance of manufacturing SMEs in Kenya.

Table 7: Beta Coefficients for innovation strategy

Unstandardized Coefficients Standardized Coefficients

Model B Std. Error Beta t Sig.
1 (Constant) 10.777 2.762 3.902 .000
OIS .635 .055 .683 11.543 .000
a. Dependent Variable: performance of manufacturing SMEs in Kenya

VII. CONCLUSIONS AND RECOMMENDATIONS [4]. Blind, K., Pohlisch, J., & Rainville, A. (2020). Innovation
and standardization as drivers of companies’ success in
A. Conclusions public procurement: an empirical analysis. The Journal of
The study also concludes that innovation strategy has a Technology Transfer, 45(3), 664-693.
positive and significant effect on the performance of [5]. Cegarra-Navarro, J.-G., Reverte, C., Gómez-Melero, E., &
manufacturing SMEs in Kenya. The study revealed that new Wensley, A. K. (2016). Linking social and economic
products, new markets, and product development influence the responsibilities with financial performance: The role of
performance of manufacturing SMEs in Kenya. This implies innovation. European Management Journal, 34(5), 530-
that improving innovation strategy (new products, new markets, 539.
and product development) would improve manufacturing [6]. Chander, N., Siow, M. L., Ramachandran, S.,
SMEs' performance in Kenya. Kunasekaran, P., & Rathakrishnan, T. (2020).
Conceptualizing Inclusive Learning and Development: A
B. Recommendations Framework towards Entrepreneurial Competency
The study recommends that the management of Practices for Sustainability. Sustainability, 12(17), 6905.
manufacturing SMEs should encourage a culture of innovation [7]. Chege, S. M., Wang, D., & Suntu, S. L. (2020). Impact of
within manufacturing SMEs by fostering an environment that information technology innovation on firm performance in
values creativity, experimentation, and risk-taking. This could Kenya. Information Technology for Development, 26(2),
involve establishing innovation labs, organizing brainstorming 316-345.
sessions, and providing incentives for innovative ideas. In [8]. Chen, M.-H., Wang, H.-Y., & Wang, M.-C. (2018).
addition, allocate resources towards R&D activities to drive the Knowledge sharing, social capital, and financial
development of new products and processes. performance: The perspectives of innovation strategy in
technological clusters. Knowledge Management Research
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