The Effect of Innovation on the Performance of SMEs in Zimbabwe: A Case Study of Manufacturing Companies in Harare

Abstract

Technological Innovation has become an indispensable tool for organizations to gain competitive advantage, increase performance, venture into new markets and survive in such a competitive atmosphere. A plethora of research has found that technological innovation is a critical factor that improves organizational performance. The study focused on investigating the effects of technological innovation on the performance of SMEs in the manufacturing industry. The study objectives were to establish the factors that influence technological innovativeness among manufacturing SMEs in Zimbabwe, determine the effect of product innovation on the performance of manufacturing SMEs, to ascertain the effect of process innovation on the performance of manufacturing SMEs in Zimbabwe and to establish the challenges faced by SMEs in the manufacturing sector adopting technological innovation in Zimbabwe. A quantitative research approach was adopted. The researcher used simple random sampling in this study and every member in the sample size has an equal opportunity to be selected. A total sample size of 66 respondents was selected randomly. A structured questionnaire was distributed to respondents and the response rate was approximately 76%. Data was processed on excel which was later uploaded on the SPSS and SmartPLS version 3.2.1 softwares. Cronbach Alpha of 0.886 was obtained and this indicated the strong reliability and validity of the study results. Composite and Average variance extracted was also used to assessed the validity of the study. It was discovered that experienced human capital, leadership, access to funding, competition, and organisation mission and culture are important in influencing innovation in SMEs. In addition, the study revealed that product and process innovation had an impact on manufacturing SMEs’ organizational performance that was statistically significant. It emerged that product and process innovation improves a number of financial performance indicators for a business, including sales growth, market expansion, rising customer happiness, and rising profit margins. Therefore, in line with the findings, the study recommends that the government must develop and implement a wide range of innovation policies that encourage best practices and support company growth and should support the creation and ongoing operation of innovative businesses through partnerships. Future studies should expand the study’s scope and sample size and other factors related to product and process innovations. In addition, future research has to take into account the creation of national and regional government policies that encourage innovation among SMEs.