Innovation in Nigerian Small and Medium Enterprises: Types and Impact

Innovation in Nigerian Small and Medium Enterprises: Types and Impact

A.A. Egbetokun (National Centre for Technology Management (Federal Ministry of Science & Technology) - Obafemi Awolowo University, Nigeria) and O.O. Olamade (National Centre for Technology Management (Federal Ministry of Science & Technology), Obafemi Awolowo University, Nigeria)
Copyright: © 2009 |Pages: 12
DOI: 10.4018/jeco.2009100104

Abstract

This article seeks to explore the types of innovation that are predominant in SMEs in developing countries and to investigate the impact of these innovations on different dimensions of firm performance based on an industry-wide innovation survey carried out in Nigeria in 2007. Although innovation is important for superior firm performance, our result found that the type of innovation that SMEs pursue is not a critical consideration in their performance. While there was no difference found in the focus of SMEs on either of product or process innovations, evidence showed that SMEs would focus more on incremental product and process innovations. Incremental innovation was found to be very important for Nigerian SMEs and a significant predictor of product quality and not of revenue. The authors conclude that SMEs chooses to pursue such innovations that most fit their strategies and available resources. Such level of innovation affords Nigerian SMEs to more extensively exploit the domestic market but cannot support extensive new product development required to enter export markets.
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Literature Review

There is no single universally accepted definition of SMEs. For instance, it has been noted in the literature that a small enterprise can be defined along three dimensions: in terms of either employment or investment or turnover, or a combination of any two, or all of the above (Atkins & Lowe, 1997; Bala-Subrahmanya, 2005). Specifically, in Nigeria, ministries, research institutes, agencies, private sector institutions, etc. use different definitions which involve the above three dimensions (Oyefuga et Al., 2008). Notwithstanding, Ramachandran (2002) argued that SMEs in the Nigerian context are best defined as those with fewer than 100 employees and below 50 million naira in assets. The lower limit for this characterisation (in terms of employment) beyond which a firm is regarded as a micro enterprise is 10 employees (see Oyefuga et al., 2008).

The subject of innovation has risen in prominence to become a global policy issue. Following this, a plethora of literature on the typology of the innovation concept has emerged. An exhaustive review of such typologies is clearly beyond the scope of this article. However, it is useful to proceed with a clear understanding of the innovation types and effects within the context of this article. Popadiuk and Choo (2006) presented a thorough review of the literature on innovation types; and from them we learn that product and process innovations are sub-sets of technological innovation which can further be resolved into radical or incremental, depending on the degree of novelty (see also García-Muiña & Navas-López, 2007; OECD, 2005; Hadjimanolis, 2003; Souitaris, 2003; Tushman & Anderson, 1986)

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