Assessing Effects of Business Innovations on Financial Performance of Small and Medium-sized Enterprises in Kenya: A Case of SMEs in Garissa County

Abstract

Despite the significant positive impact of small and medium-sized enterprises on the economic growth and employment generation, small business enterprises in Kenya are continuously collapsing. The high rate of collapse in threatening their contribution to Kenya’s gross domestic product. Although empirical studies from developed economies have revealed business innovations as the appropriate approach to addressing financial performance of small business, there is scanty documentation on business innovations as being a key determinant of the financial performance of small medium enterprise in Kenya. hence this study which assessed the manner in which the business innovations affects financial performance of Kenyan small medium enterprises. Adopting descriptive research design, the research used the 258 small medium enterprises in Garissa County as its target population from where a sample population of 155 respondents was selected using stratified proportionate random sampling. Data was collected from primary sources using a questionnaire and analysed using quantitative analysis approach to yield descriptive statistics as well as inferential statistics with help of SPSS software Version 21.0. The study concludes that at 0.05 (5%) significance level, each of; financial institutional innovation, financial product innovations has positive and moderate statistically significant effect on financial performance of small and medium-sized enterprises in Kenya while each of; marketing innovation and financial process innovations has a statistically strong positively significant effect on the financial performance of small and medium-sized enterprises in Kenya. The research recommends that the financial performance in Kenya should; actively embark on adopting financial institutional innovations for improving their financial performance, embrace financial product innovations, develop and acquire marketing resources and appreciated and support modern financial process innovations.