The Influence of Innovativeness on the Financial and Non-Financial Performance of Retail Smes in Tshwane Metropole

Abstract

ABSTRACT: SMEs play a crucial role in the economy by creating jobs, alleviating poverty, innovating, and driving economic growth and development. However, they frequently fail due to business challenges such as poor performance. Grounded in the innovation literature and the Resource-Based View Theory (RBV), this study empirically investigates the influence of innovativeness as a dimension of entrepreneurial orientation (EO) on retail SMEs' performance indicators (financial and non-financial performance) in Tshwane Metropolitan Municipality. Saunders' research onion model was used to frame the methodology. The study adopted a quantitative research design while following a deductive approach. A survey method was used as a research strategy to collect data from 196 SMEs with the measuring instrument adapted from recent literature and from previously tested instruments. The questionnaire used a five-point Likert scale, ranging from 1 = strongly disagree, 2 = disagree, 3 = neutral, 4 = disagree, 5 = strongly agree. The "neutral" response was added to assure respondents that they need not feel compelled to answer every question. The Statistical Package for the Social Sciences (SPSS) was used for data analysis. The results revealed that innovativeness positively and significantly affects both financial and non-financial SMEs' performance directly and that representatives (managers/owners) of Tshwane Metropolitan Municipality retail SMEs believe that if their team is open to new ideas and changes, the implementation of innovation in practice within SMEs will rise. Furthermore, managers recognize and value fresh ideas to encourage staff to "think outside the box" and share their creativity, which facilitates and encourages the actual implementation of innovation. Lastly, the study found that the more open SME managers/owners are to innovation, accept new ideas, and support new resources for innovation, the higher the innovation will take place in the organization. Operationalization of the vague term innovativeness is also a contribution to the literature. This research is crucial for developing countries and regions such as the Tshwane Metropolitan Municipality, Gauteng province, South Africa, wherein such studies are lacking, despite the retail sector's significant role in this country's economy. SME managers/owners must regard innovation as an intrinsic aspect of their strategy in this line.