Innovation And Performance Of The Small And Medium Enterprises In Machakos Township, Kenya.
Innovation has become a major topic not only for the Small and Medium Enterprises around the world but also for other sectors of the economy. The benefits of innovation according to a study conducted in Nigeria by Amanakwe (1995), include increasing profit margin, product diversification and differentiation, to meet and exceed needs, securing a market strategic position, create a brand, improve product quality, lowering production cost, improve working environment, improve product flexibility, reduce environmental damage and to replace products being faced out. The main objective of the study was to establish the relationship between innovation and the performance of Small and Medium Enterprises in Machakos Township. The study used a descriptive research design to explain the relationship between innovation and the performance of SMEs in Machakos town. The target population of the study comprised of licensed SMEs in Machakos Township and the data of these licensed SMEs was provided by the Machakos County government. The town was targeted because of the high rate of SMEs decline in the area and because of the variability in the nature of SMEs operating in the area including wholesalers, accommodation and hospitality, agriculture, technical services, manufactures and private education and health service providers. A questionnaire with open ended and closed ended questions was developed and used in data collection. The study found and concluded that process, product, positioning and paradigm types of innovation had a positive relationship with the performance of some business types of the SMEs in Machakos town. The findings showed a close relationship between innovation and performance of SME where those that embraced innovation survived longer and were profitable. It was recommended that embracing innovation after research on which suits which SME best and research also needs to be done on which kind of innovation suits a given entity. The study further suggested considerations like having mechanisms to implement tax incentives, involving key stakeholders in the business types and academia in research and development, develop policies to encourage innovation listed in this study and initiate programs that recognize and reward innovators. The limitations encountered during the study is the unwillingness of the owners of these SMEs to give information about their businesses because of the fear that the information could reach their competitors and later have a competitive edge over them. The study suggested that the same study should be replicated in other counties to compare the findings from these other counties and also to access the extent of innovation and consequently the connection between their impacts on the performance of specific types of business rather than generalizing in the whole SME sector which might not apply to others.
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