Impact of Innovation Types on SMEs’ Performance in the Cape Coast Metropolis of Ghana

Abstract

Research on innovation is up surging in recent years in management literature. Yet empirical research on how innovation types impact the different aspects of small and medium enterprises’ (SMEs’) performance is still under-researched, particularly in emerging economies. This study develops a holistic conceptual model to examine how innovation types impact the various dimensions of SMEs’ performance in the Cape Coast Metropolis of Ghana. The study builds on the dynamic capabilities theory and employs a quantitative research approach via a survey questionnaire and simple random and convenience sampling techniques to select 307 respondents for the analysis. Structural Equation Model Partial Least Square was used to test the hypotheses formulated. Results demonstrate that all the four types of innovation—product, process, organisation and marketing—positively impact SMEs’ performance, but organisational innovation has the has the most considerable effect size. More specifically, findings show that product innovation positively relates to performance in terms of—customer satisfaction, market share, sales and competitiveness; process innovation—speed time to market and competitiveness; marketing innovation—sales, customer satisfaction, market share and competitiveness; and organisational innovation—profit, competitiveness, speed time to market and growth in employment. It is, therefore, recommended that managers at operational and strategic levels in SMEs give distinctive attention to these types of innovation in their business strategies to enhance performance and growth. The government should also provide educational and financial support to help the SMEs in their adoption of innovation. This study theoretically and pragmatically contributes to entrepreneurship and innovation research in emerging economies.