Industrial innovation in the face of stiff competition from Chinese imports: a study of small and medium scale garment firms in Nairobi

Abstract

The rise of China as a global producer in the late 20th century and its increased openness have led to concerns, not just in the developed world but also within developing countries. Kenya has experienced increased garment imports from China, particularly after opening up its markets in the late 1980s and early 1990s which continues to compete with locally made clothing. Local garment producers have reacted differently to this challenge. Some have closed shops while others have proved to be very resilient, surviving and thriving in the new liberalized markets.

This study focused on how garment SMEs in Nairobi have reacted to the increased clothing imports from China. Our overall aim was to investigate the different types of innovations adopted by these firms in responding to the stiff competition posed by Chinese clothing imports. We tried to establish whether there was a link between Chinese competition and firms' innovative behaviour. In order to realize this objective, a case study of fifteen garment firms was chosen. Face to face interviews with managers and/or owners of these firms were conducted.

The data collected was analyzed into themes andfindings written on the same. The study established two major sources of competition for garment SMEs, which were, local competition and Chinese competition. Second-hand clothes were not regarded as competitors. The study also revealed that garment firms had adopted various innovations so as to cope with this competition. These innovations were incremental but not radical. They included process, product, market innovations and new sources of supply. Product innovations were the most common among these firms. Competition from other local producers emerged as the strongest driver of innovations among garment SMEs as opposed to Chinese competition. Creativity among entrepreneurs was also identified as a considerable driver of innovations among these firms.

The study concludes that even though Chinese competition was not regarded as the strongest driver of innovations, many firms still opted to concentrate on products that were not in direct competition with Chinese imports and/or where Chinese competition was presumed to be low. This suggested that Chinese influence on local producers is strong even though some entrepreneurs did not see it that way.

The study recommends government control of clothes importation and strict adherence to quality standards for those imports allowed in and promotion of cotton production and revival of textile ginning mills. Entrepreneurs in this area should also adopt product specialization and value addition as studies have shown that such activities have the potential to boost profit margins of garment firms. In addition, the government together with other stakeholders needs to establish training institutions in fashion design and other specialties relevant to garment industry as they are currently inadequate in the country, among others.