Interplay between Technological Innovation and Employee Skills in Accelerating Small Medium Enterprise Growth

Abstract

Past statistics have shown that among five SMEs start-ups, three of them dissolve before a lifespan of five years. There are numerous factors that affect SMEs growth among them technology and employee skills. It would be important to consider the influence of technology and employee skills on the growth of SMEs. This study investigating the inter play between technological innovation and employee skills in accelerating the Small Medium Enterprise (SMEs) growth. A descriptive research design was applied to implement the study targeting a total population of 174 firms. This study employed stratified random sampling technique to categorize the firms in to three different sections of interior design firms, interior decoration firms and architectural firms as they show different heterogeneous characteristics. A sample of 54 respondents was selected from the population using simple random sampling. Questionnaires were the main primary data collection instruments. A pilot study was used to confirm content validity of the data gathering instruments while the Cronbach’s coefficient alpha was used to establish reliability. Quantitative data collected was analyzed using descriptive statistics and expressed as percentages and frequencies. Chi square test was conducted to test the relationship between the independent and dependent variables. Besides, regression analysis was done to determine the extent to which the independent variables influenced SMEs growth. Inferential statistics was tested at 95% confidence level and p-value ≤ 0.05. The chi square results indicated that employee skills were significantly associated with SMEs sales (χ2=9.000, p=0.03), profits (χ2=20.700, p=0.002) but not net assets (χ2=3.706, p=0.282) and number of employees (χ2=2.753, p=0.427). Further, technological innovation was significantly associated with SMEs sales (χ2= 8.322, p=0.040), profits (χ2=9.584, p=0.022) net assets (χ2=13.846, p=0.004) but not the number of employees (χ2=0.800, p=0.722). Further, the regression analysis indicated that a unit rise in technological innovation would result in 0.756 whereas a unit increase in employee skills would cause 0.352 unit increase in growth of SMEs. The study concluded that technological innovation and employee skills are associated with growth of Interior Design SMEs in Nairobi County. This study recommends that SMEs should enhance their technology to facilitate innovation of new products hence spur their growth. Likewise, SMEs should enhance their employees’ skills to expand their growth.