The Effect of Product Innovation on the Profitability of Private Manufacturing Firms in Nairobi County

Abstract

The main objective of this study was to determine the effect of product innovation on the profitability of private manufacturing companies in Nairobi County. There are 378 private manufacturing companies registered with Kenya Association of Manufacturers. Out of this, a sample of 45 private manufacturing companies was selected using convenience random sampling which was approximately 11.9% of all the private manufacturing firms in Nairobi County. Descriptive research design was used and primary data was collected using questionnaires. A total of 45 questionnaires were sent, filled and picked. There were 32 questionnaires that were filled therefore representing a 71.11% response rate. Descriptive statistics such as mean, medium, and standard deviation was used to describe the data collected. Data presentation was done by the use of percentages and frequency tables. The study found a positive and significant correlation between product innovation and ROA. The findings also revealed that the correlation between inflation rate and ROA is negative and significant. Cost of production was also found to be negatively and significantly associated with ROA. The study concluded that product innovation has positive effects on profitability. Hence, recommended that manufacturing companies should invest more on product innovation practices as it improves financial performance and also improve their competitive advantage. The study suggest that further study should be done considering all counties since this study only focused on companies in Nairobi Country hence further study on effects of product innovation on Profitability need to be done in the Country