Technological Capabilities, Learning Mechanisms and Innovation Performance: a Study of Potato Crisp Processing in Kenya

Abstract

The main objective of this thesis was to investigate the extent and how food processing firms in Kenya build their technological capabilities as a part of a broad firm strategy to achieve competitiveness. In doing this, it explored three specific objectives. The first objective was to identify and document the level of technological capabilities the firms were operating at. The second objective was to examine the learning processes which have supported the development of the said capabilities. The third and last objective was to explore the relationship between capability building and a firm’s innovative performance. To explore these objectives, the study drew on the innovation studies theory which argues that examining the learning mechanisms adopted by different firms potentially holds the key to explaining the differentiation in how the firms build their capabilities. This builds into the technological capability building framework that maps the relationships that govern a firm. A firm learns in order to build its technological capabilities. The technological capabilities in turn affect its innovative performance. This in turn affects the firm’s outcomes. Placing building of technological capabilities at the heart of firm success and growth in developing countries is a departure from previous studies. It builds on recent studies which have shown that internal capabilities among a growing number of African firms are improving leading them to achieve growth and success. However, many studies have not explored in detail how such firms build those capabilities in the first place. This thesis extends the discourse in the area by using a case study methodology whereby an in-depth study of six potato processing firms drawn from the Nairobi Metropolitan Area in Kenya was done. The data collection was accomplished in three rounds. The first round of data collection was done between December 2013 and January 2014. This was followed by a second round of interviews which were done between October and November 2014. Finally, the third and last round of interviews were conducted between August and November 2016. By the end of these rounds, each of the six firms had been visited at least three times. On the objective of technological capabilities based on the functions they perform, the study analysed production and marketing capabilities. Eight capabilities were analysed under production while four were analysed under marketing. Based on the degree of complexity, the capabilities were analysed based on four levels starting with very basic, to basic, to intermediate and finally advanced. Looking at the findings, the conclusion is that there are variations first from one firm to the next and secondly from individual capability to the next. There are two exceptions both relating to the production capabilities. The first is firm A which featured at the advanced level in seven out of eight production capabilities. The second is where all the six firms were at the same level specifically in terms of the sorting capability. Nevertheless, cumulatively more firms featured in the basic level compared to advanced one. Similarly, we observed that the marketing capabilities seemed to be more developed compared to the production ones. On the objective of learning mechanisms, a dichotomy was made of internal versus external mechanisms. Looking at the findings, the study concluded that there are marked variations in the way the six case study firms appropriate the learning opportunities. Comparing internal and external mechanisms, it was established that the internal mechanisms were the most popular among the firms. These were followed by the private external mechanisms and finally collective external mechanisms. Of the specific mechanisms, training came out very strongly as a favored mode of capability accumulation. Similarly, size featured very strongly as an explanatory variable determining how each firm undertook its learning processes. On the last objective of the relationship between capability building and the firm’s innovation performance the study concluded that a firm’s capability level was a good predictor of how the firm performed. Thus, the effort which was put in the capability building ultimately paid off by propelling the firm to better innovation performance. As a result, though there are variations, the firms which featured at the advanced capability level also did very well as far as innovation performance was concerned. This study has implications for theory, policy and practice. Theoretically, it extends knowledge on the study of successful African firms by focusing on how firms build their capabilities so as to achieve competitiveness. At the policy level, the study highlights various opportunities that need government intervention so as to support private enterprise in the country. A key recommendation arising from this is the need to have more government agencies coordinating various initiatives that are supposed to support firms. The study also recommends that the government increases its efforts towards increasing publicly provided training programs to firms. Additionally, to address the skills gap in the sector, the study recommends that the government increases its support to institutions such as the National Industrial Training Authority (NITA) which are mandated to respond to such concerns. Regarding practice, the study delves into the food processing industry in Kenya and analyses how firms in a particular sub-sector engage with various actors in their quest to learn and build their capabilities to attain competitiveness. A key recommendation arising from this study concerns the need for local firms to increase their efforts towards improving the packaging capabilities to match the customer expectations. This will also enable the firms to cope with competition particularly from abroad.