Dimensions of innovation and their effects on the performance of small and medium enterprises: the moderating role of firm’s age and size

Abstract

The study examined the effect of each of the dimensions of innovation on the performance of small and medium enterprises (SMEs) in Harare, Zimbabwe. It also examined the moderating effect of a firm’s age and size on the innovation-performance relationship of SMEs. A cross-section of 330 SMEs was taken from Harare using a structured questionnaire which was randomly distributed to the respondents. Structural equation modeling and moderated regression analyses were performed to test the research hypotheses. Results show that, aggregately innovation does not significantly influence both financial and non-financial performance of a firm. Out of the four dimensions of innovation, only marketing innovation significantly influences the firm’s financial and non-financial performance. Results also show that the effect of marketing innovation on the firm’s financial performance is stronger in younger than older firms. Similarly, results reveal that the effect of marketing innovation on the firm’s financial performance is stronger in bigger than smaller firms. Therefore, younger and bigger firms are advised to take advantage of innovation as a tool to improve their performance. On the contrary, older and smaller firms are advised to be cautious when attempting to boost their performance through innovation.