Effect of Technology Innovation On Growth of Small Medium Enterprises in Eldoret Town

International Journal of Strategic Management
and Procurement (IJSMP) ISSN: Applied for 1

(1) 1-14, May, 2019 www.oircjournals.org
Effect of Technology Innovation on

Growth of Small Medium Enterprises
in Eldoret Town
1
Stephen Kipkorir Chirchir 2Caleb Akuku
1
MSc. Student Jomo Kenyatta University of
Agriculture and Technology
2
Lecturer, Jomo Kenyatta University of Agriculture
and Technology
Type of the Paper: Research Paper.

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Indexed in: worldwide web.
Google Scholar Citation: IJSMP
How to Cite this Paper:
Chirchir K. S. and Akuku C., (2019). Effect of Technology Innovation on Growth of

Small Medium Enterprises in Eldoret Town. International Journal of Strategic
Management and Procurement (IJSMP), 1 (1) 1-14.
International Journal of Strategic Management and Procurement (IJSMP)

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Chirchir and Akuku (2019) www.oircjournals.org
Effect of Technology Innovation on Growth

of Small Medium Enterprises in Eldoret
Town
Stephen Kipkorir Chirchir 2Caleb Akuku
1
1
MSc. Student, Jomo Kenyatta University of
Agriculture and Technology
2
Lecturer, Jomo Kenyatta University of Agriculture
and Technology
Abstract
Growth of small and medium enterprises is relevant in promoting innovation leadership in businesses of different
countries. Kenyan vision 2030 emphasizes the need for appropriate SME’s growth strategy for wealth creation
as one of the means to make Kenya globally competitive and prosperous nation. The objective of the study was to
determine the effect of technology innovation on growth of small medium enterprises in Eldoret town. The study
was guided by innovation diffusion theory. The target population composed of all the managers of SMES in
Eldoret Town. The accessible population was 1235 managers of SMEs in Eldoret Town. The sample size of the
study was 293 residents. The study stratified the sample population into SMEs categories before doing
proportionate sampling to get sample size for each SMEs category. The researcher collected primary data using
semi structured questionnaires which comprise of open and closed ended questionnaires. Collected data was
analyzed by using the statistical package for social sciences (SPSS) program. The study was analyzed using both
descriptive statistics and inferential statistics. Frequency tables, graphs, percentages, and means were used to
display results. The findings of the study were used to make conclusion and recommendation. The study findings
revealed that technology innovation has a positive and statistically significant effect on growth of SMEs in Eldoret
town (β3=0.193, p<0.05). The study recommends to the SMEs managers to ensure that they seek consumer need,
want and taste before embarking on production to ensure customers satisfaction in their products innovation. The
management should planned marketing innovation strategy for the product at all level of its level of its life which
includes pruning of brands, improve upon them, and rename them to reflect improvement on them.
Key Words: Technology, Small medium enterprises, Innovation,
Introduction
Small and medium-sized enterprises growth can be evaluated in terms of survival, success and competitiveness
(Hsu & Chen, 2013). Growth measurement for SMEs falls into two categories: financial and non-financial
measures. Growth of small and medium enterprises faces challenge in measuring the effectiveness of adopting
technological innovations in their operations because most of the measurements are based on large firms (Taylor
& Taylor, 2014). An effective growth measurement strategy can indicate the degree of success of implementing
technological innovations in a firm.
In addition established that effectiveness of technological innovations may not be fully captured in the financial
metrics only but also review the non-financial aspect. The balance between financial and non-financial measures
should be used to establish an overall view of the effects of technological innovations on SMEs growth. The
balanced scorecard concept arose from the realization that no single indicator can capture the full complexity of
a unit’s growth. With regard to our study, they believe that this frame work is more appropriate than a narrower
financial approach because innovation effectiveness can be shown not only in financial improvements, but also
non-financial indicators such as employee perspectives; internal processes; and/or customer satisfaction
improvements (Ates & Garengo, 2013).
Globally, small and medium enterprises have been shown to play a vital role in the economic development of a
country. Countries all over the world are focusing on SME development plans to assist the SMEs to meet the new
business challenges in the competitive global business environment. The SMEs growth metrics used fall into two
major categories: financial and non-financial indicators. Finance-based metrics include measures such as costs,
return on investment, profit margin, and sales growth; non-finance-based metrics cover areas such as customers
satisfaction and retention, internal processes (lead time, delivery, process time and productivity), and employees’
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learning and growth (development and knowledge). Using both financial and non-financial measurements
provides a better view for growth improvement. In addition, evaluating both financial and non-financial measures
give whole some view of the potential effects of innovations. Firms that use financial evaluations will not be
capturing all of the innovation’s benefits and therefore will have a less positive perception of the overall
effectiveness of the innovation (Harrison, 2013).
India, the Micro and Small Enterprises (MSEs) Sector plays a pivotal role in the overall industrial Economy of
the country. It is estimated that in Terms of value, the sector accounts for about 39% of the manufacturing output
and around 33% of the total export of the country. In India, SMEs’ Contribution to GDP is nearly 30%. Moreover,
in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial
sector. The major advantage of the sector is its employment potential at low capital cost.
The promotion of SMEs, especially those in the informal sector, is viewed as a viable approach to sustainable
development because it suits the resources in Africa (Martin, 2014). SMEs are the main source of employment in
developing countries comprising over 90% of African business operations and contributing to over 50% of African
employment and GDP (Nwobu, Faboyede & Onwuelingo, 2015).
However, in most African countries some of the economic development does not have the initial conditions to
ensure the success of SMEs or even large local firms in the industrial sector. (Gereffi & Fernandez-Stark, 2016).
According to Ayandibu and Houghton (2017) though uniformed growth is experienced across the African
continent with some countries like Angola, Rwanda and Malawi doing well, other like Zimbabwe continue to
struggle. However, the overall positive growth has made Africa attracts a number of investors having direct
investment especially from USA, China and India a process expected to further boost long term economic
growth.
In Kenya, SMEs growth has greatly invested in innovations which enable small and medium enterprises to grow,
prosper and transform in synchronization with the changes in the environment, both internal & external (Masika,
Omondi, Natembeya, Mugane, Bosire & Kibwage, 2015). The SMEs sector in Kenya has witnessed radical
changes of late, based on many innovations in products, processes, services, systems, business models, business
innovation, governance, employee’s skills, business innovation and regulation. The pervasive influence of
information business innovation has revolutionaries in banking. The SMEs growth on the markets has been
liberalizing in both financial and non-financial technologies. This liberalization and globalization is due to various
political and economic events which have increased competition among African financial market and forcing the
authorities to deregulate and restructure the domestic banking industry.
SMEs growth has made all profit seeking enterprises to constantly adapt to new and improved products, services
and organizational structures that can reduce their costs of production, satisfy their customers’ needs better and
yield higher profits (Mugane, 2015). Customers demand for variety, convenience and new services. They want
products that can meet their precise, individual needs. Kenya’s SME’s growth has undergone significant
transformation in the last few years and that many new innovations systems have come into place. With the recent
innovations in the market and more so small and medium enterprises in Kenya, whole industry has been
transformed through enhancement of efficiency and effectiveness.
Despite Eldoret town witnessing rapid growth of malls there is still need for growth in SMEs. This is because the
business customers, business environment, and entrepreneur characteristics has affected the growth of SMEs
positively (Chelagat & Ruto, 2014). However, other factors such as product innovation, process innovation,
technology innovation and marketing innovation has not been looked into therefore the current study sought to
determine the effect of business innovation strategies on growth of small and medium-sized enterprises in Eldoret
town, Kenya.
Statement of the Problem

Growth of small and medium enterprises is relevant in promoting innovation leadership in businesses of
indifferent countries. Kenyan vision 2030 emphasizes the need for appropriate SME’s growth strategy for wealth
creation as one of the means to make Kenya globally competitive and prosperous nation (Storey, 2016).
Nevertheless, factors influencing entrepreneurial growth activities are not clear. Policy makers need to understand
the factors in order to come up with viable policies and development programs to promote entrepreneurship in the
country.
Small and medium enterprises in Kenya has for the past decade undergone revolution and marketing innovations.
These reforms have brought about many organization changes in the sector and have also encouraged other firms
to enter and expand their operations in the country. Innovations are now thought to hold the promise of a new
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commercial revolution by offering an inexpensive and direct way to promote SMEs products and services.
However, the competitive environment of SMEs with more diversity in financial products and increased demand
for and the offer of products seem to be stronger and fundamental in Kenyan economy.
Over the period studies conducted on the impact of technological innovations on the growth of the firm have been
increasing. Njogu (2014) in their studies have established that SMEs that adopt technological innovations led to
increased growth of the firm thus more revenue. Research studies have established the impact of technological
innovations on SMEs the following were considered as innovation effects: increased market share, improved
product quality, reduced material costs per unit of product, improved ecological, safety and health aspects and
compliance with legal regulations and standards. From the previous studies there is a research gap on the effect
of business innovation on SME’s growth. The study sought to feel this gap by determining the effect of business
innovation strategies on growth of small and medium-sized enterprises in Eldoret town.
General Objective
The objective of the study was to determine the effect of technology innovation on growth of SMES in Eldoret
town
Research Hypothesis
HO1: Technology innovation has no statistical significant effect on Growth of SMES in Eldoret town
Theoretical Review
This study adopted innovation diffusion theory developed by Rogers in 1995 and the evolutionary model of the
firm developed by Nelson in 1994 to research on the effect of business innovation strategies on growth of small
and medium-sized enterprises in Eldoret town.
Innovation Diffusion Theory

Innovation Diffusion Theory was developed by Rogers in 1995. The theory sought to explain how new ideas or
innovations are adopted, and this theory proposes that there are five attributes of an innovation that effect adoption:
relative advantage, compatibility, complexity, trial-ability and observability. Relative advantage is the degree to
which an innovation is perceived as being better than the idea it supersedes Innovation Diffusion Theory suggests
that innovations that have a clear, unambiguous advantage over the previous approach was more easily adopted
and implemented. Current research evidence indicates that if a potential user sees no relative advantage in using
the innovation, it will not be adopted (Greenhalgh & Robert, 2004). Compatibility is the degree to which an
innovation fits with the existing values, past experiences, and needs of potential adopters. There is strong direct
research evidence suggesting that the more compatible the innovation is, the greater the likelihood of adoption
(Greenhalgh et al., 2004).
Complexity is the degree to which an innovation is perceived as difficult to understand and use. Furthermore,
Rogers suggested that new innovations may be categorized on a complexity-simplicity continuum with a
qualification that the meaning or the relevance of the innovation may not be clearly understood by potential
adopters. When key players perceive innovations as being simple to use the innovations was more easily adopted
(Greenhalgh et al., 2004). Trial ability is the degree to which an innovation may be experimented with on a limited
basis. Because new innovations require investing time, energy and resources, innovations that can be tried before
being fully implemented are more readily adopted. Finally, observability is the degree to which the results of an
innovation are visible to the adopters. If there are observable positive outcomes from the implementation of the
innovation then the innovation is more adoptable.
The relevance of the theory outlines the adoptability of SMEs to generate and pinpoint the innovative ideas in
place and implement the ideas and finally adopting the one that suits the organization in terms of operationalization
and functionality of the innovative ideas the organization came up with. For this reasons the complexity,
compatibility, trial ability and observability of the innovation ideas definitely can lead to organization Growth and
even development of new innovation in future times.
Technology Innovation and Growth of SMES

A study by Kuswantoro (2012) revealed that distribution channels innovation is positively related to overall
SME’s growth. The study results indicated that entrepreneurial orientations via technological innovativeness to
be positively associated with SMEs growth. Consistently in Turkey context examined innovation and SME’s
4|Page
growth in automotive industry (Atalay, 2013). Their results demonstrated that technological innovation (product
and process innovation) has significant and positive impact on SME’s growth, but no evidence was found for a
significant and positive relationship between non-technological innovation and SME’s growth.
Tumwine, Akisimire, Kamukama and Mutaremwa (2015) study examined the effect of technology product
development on Growth of SMEs in the Uganda’s manufacturing sector. Findings of the study indicate the Growth
of SME vary with the choice of the business strategies they adopted that result to building core competences with
regard to the competitive advantages. Additionally, to a certain degree, the findings of the study suggest product
development technology as measured by technological complexity of process moderates the relationship between
business strategy and the Growth of SME’s. Finally the study suggests the model diagrammatic model that
portrays the role of technology as facilitator to Growth of SME’s and in meeting overall customer needs and at a
balanced cost and fit of positioning in stiff competitive environment.
Zhao, Lee & Chen, (2011) indicated that for a long time, product development through technology has been
identified as the key for commencing novel activities through risk-taking and firm proactively which results in a
firm’s higher Growth than competitors. Firms that focus on technological advancement through innovation
research and development generate above average Growth.
According to Quatraro and Vivarelli (2014) study done manufacturing companies in Kenya indicated that firms
that employ technology in their product development are known for superior Growth because they believe in
acquisition of new technologies for product innovation, research and development which enables the firm to
produce unique products which are hard to copy. Ocheni and Nwankwo (2012) noted that technology deserves
consideration since it pursues opportunities and renewal of new market from the areas of operation that are existing
to match with the changing needs of the customers in the market.
A study by Zhou (2010) states that for product development on technology oriented firms to achieve superior
Growth, they should apply technical ability to produce new products in the market to cope with competition,
flexible products so as to change with changing needs of customers and be able to maintain them, and originality
in developing original products, services and processes which are unique and difficult to imitate. Kariithi (2017)
found out that customers choose technologically superior products and services and that customers stick to a firm
that has the capability to react to their choices in a successful way.
Technology Innovation
 Significantly improved Growth of Small and Medium-
production Sized Enterprises
 Improved delivery method  Market share
 Significant changes in  Product quality
techniques  Information reliability
 Changes in equipment  Speed
Independent Variables Dependent Variable

Figure 2.1 Conceptual Framework
Research Methodology
Research Design
This research study was studied through the use of a cross-sectional research design. This is because cross-
sectional study was used to capture information based on data gathered for a specific point in time Cooper and
Schindler (2003). The data gathered is from a pool of participants with varied characteristics and demographics
such as age, gender, income, education, geographical locations, and ethnicity for managers of the SMEs in Eldoret
Town.
Target Population
According to Ngechu (2004) the target population in statistics is the specific population about which information
is desired. The target population comprised of all the managers of SMEs in Eldoret Town. The accessible
population was 1235 managers of SMEs in Eldoret Town. Mugenda and Mugenda (2003) explain that the
5|Page
accessible population should have some observable characteristics, to which the study intends to generalize the
results of the study.
Table 3.1 Target Population
Target Group Accessible Population
General Shops 115
Chemist 105
Service Firms 148
Mobile and Phone Accessory Shops 176
Saloon and Barber Shops 163
Boutiques 136
Electronic Shops 93
Hotels 117
Groceries 97
Hardware 85
Total 1235
Source: Uasin Gishu County government records (Company Registrar, 2017)
Sample Frame
Sampling frame is a list of all those within a population who can be sampled, and may include individuals,
households or institutions (Cohen & Levinthal, 2000). In this study, the sample frame was 115 general shops, 117
hotels, 163 saloon and barber shops, 136 boutiques, 148 service firms, 176 mobile and phone accessory shops,
105 chemists, 97 groceries, 85 hardware and 93 electronic shops in Eldoret Town Uasin Gishu County. This
choice was arrived by choosing those SMEs with managers.
Sample Size and Sampling Technique

According to Kothari (2009) sample size refers to the number of observations or replicates to include in a statistical
sample. Therefore sample size was obtained using Krejcie & Morgan, 1970 formula for finite population which
is calculated as under:
Where:
S = Required Sample size
X = Z value (e.g. 1.96 for 95% confidence level)
N = Population Size 1235
P = Population proportion (expressed as decimal) (assumed to be 0.5 (50%)
d = Degree of accuracy (5%), expressed as a proportion (.05); It is margin of error
1.962 × 1235 × 0.5 × 0.5
0.05 × (1235 − 1) + 1.962 × 0.5 × 0.5
2
1186.094
S= 4.0454
S= 293
Table 3.2 Sample Size
Target Group Proportion Sample Size
General Shops 115/1235*293 27
Chemist 105/1235*293 25
Service Firms 148/1235*293 35
Mobile and Phone Accessory Shops 176/1235*293 42
Saloon and Barber Shops 163/1235*293 39
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Boutiques 136/1235*293 32
Electronic Shops 93/1235*293 22
Hotels 117/1235*293 28
Groceries 97/1235*293 23
Hardware 85/1235*293 20
Total 1235/1235*293 293
The study stratified the sample population into SMEs categories before doing proportionate sampling to get
sample size for each SMEs category. The participants to this study were picked using purposive sampling because
involved managers of this SMEs.
Data Collection Instruments

The researcher collected primary data using semi structured questionnaires which comprise of open and closed
ended questionnaires. Closed ended questions required respondents to fill the questionnaires on their own after
making some necessary clarifications so as to get their full consent while open ended questions is used where
explanation and personal opinion are sought. The study considered questionnaires for they have advantages over
other types of research instruments in that they are cheap, do not require as much effort from the questioner as
verbal or telephone surveys, and often have standardized answers that make it simple to compile data. The
questionnaire designed in this study comprised of two sections. The first part included the demographic
characteristics of the respondent. The second part was devoted to study specific objectives.
Pilot Study
Piloting of research instruments was done among small and medium enterprises in Siaya town by distributing 29
questionnaires representing 10% of the total sample size. Pilot study was carried out to ascertain validity and
reliability of research instruments.
Validity
According to Patton et al., (2001) validity is quality attributed to proposition or measures of the degree to which
they conform to establish knowledge or truth. An attitude scale is considered valid, for example, to the degree to
which its results conform to other measures of possession of the attitude. This aspect of good instrument in this
study was achieved through subjecting the instruments to content experts who are the researchers’ supervisors.
The supervisor’s comments were considered in making necessary revision on the instruments, which was then be
revised to ensure validation. For a research instrument to be considered valid, the content selected and included
in the questionnaire must be relevant to the variable being investigated (Mutai, 2000).
Reliability
Reliability of an instrument according to Bush (2007) is the probability that repeating a research procedure or
method would produce identical or similar results. In order to test the reliability of the instrument to be used in
the study, the test- retest method was used. The questionnaire was administered twice within an interval of two
weeks. Small and medium enterprises in Siaya town were used in the piloting study which was not be used in the
actual study. The reliability of the items was based on the estimates of the variability among the items. The
reliability coefficient was determined using scores from the test retest technique that was used. A reliability
coefficient of at least 0.7 of the Cronbach alpha was considered high enough for the instruments to be used for the
study (Neuman, 2000). The results obtained from the pilot study assisted the researcher in revising the
questionnaire to make sure that it covers the objectives of the study.
Data Collection Procedures

Data collection procedures refer to the systematic steps that the researcher follows in the correct way to obtain
data from the field (Oso and Onen, 2005). The researcher first obtains a letter of permission from University. The
researcher then makes preliminary visits to County Government of Uasin Gishu to request for permission to
undertake research in SMEs in Eldoret Town. After permission was granted, a date was set and appointment was
booked with the SMEs managers. Potential participants was briefed by the researcher about the purpose of this
7|Page
study during data collection period, researcher liaised with SMEs managers to ensure that data are collected when
they are free to avoid interfering with their business transactions.
Data Analysis and Presentation

Collected data from the field was coded, cleaned, managed and analyzed with the aid of statistical package for
social sciences (SPSS) program version 21. The data was analyzed using both descriptive and inferential statistics.
Descriptive statistics was measures of central tendency such as frequency, percentages, mean, and standard
deviations, minimum and maximum. Inferentially the study used correlation and multiple regressions. P-value of
less than 0.05 was used to define statistical significance in both correlation and multiple regressions. Frequency
tables, graphs, percentages, and means were used to present results the research. The following multiple regression
models were guide multiple regression analysis from collected data.
Y= β0 + β1X 1+ Ɛ…………………………………..……………………Equation 3.1
Where:
Y Represents Growth of SMEs in Eldoret town
β0 Represents Constant
X1 Represents technology innovation
Ɛ Represents Error Term
β1, β2, β3, β4 repesent régression Coefficients of the Independent Variables
4.0 Findings and Discussions
Response Rate
The study response rate was 259 questionnaires out 293 questionnaires that were filled well while the rest had
errors and the study rejected. This represented 88.4% response rate and according to Bable (1995) the response
rate of 70 percent and above is satisfactory to conduct adequate data analysis.
Pilot Study Results

Reliability test was done after collecting piloted data which were used to ascertain for validity and reliability of
research instruments. Cronbach’s Alpha of more than 0.7 was taken as the cut off value for being acceptable which
enhanced the identification of the dispensable variables. The internal consistency method provides a unique
estimate of reliability for the given test administration. The results of the reliability tests were as shown in the
Table 4.1. The study findings indicated that values of Cronbach’s Alpha for product innovation was 0.883, process
innovation was 0.953, technology innovation 0.961, marketing innovation 0.971 and growth of SMEs 0.908
showing all values were above 0.7 implying research instruments used for data collection were reliable.
Table 4.1 Reliability Statistics
Items Cronbach's Alpha N of Items
Technology Innovation .961 4
Growth Of SMES .908 3
Background Information
The background information of respondents was examined and the following was part of respects tested; the
gender of the response, the age of the response, the working experience of the respondents and finally the level of
education of the respondents.
Gender of the Respondents
The study findings on the gender of the respondents showed that 108(41.7%) of the respondents were male while
151(58.3%) of the respondents were female. This implies that the study collected data from both genders hence
there was no biasness in getting information based on gender. This is shown in Table 4.2.
Table 4.2 Gender of the Respondents
Gender Frequency Percent
Male 108 41.7
Female 151 58.3
Total 259 100.0
Age of the Respondents
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The study findings on the age of the respondents showed that 110(42.5%) of the respondents were between 21-30
years, 108(41.7%) of the respondents were between 31 to 40 years, 41(15.8%) of the respondents were 40 years
and over. This implies that majority of respondents were youth who operate the SMEs in Eldoret town. This is
shown in Table 4.3.
Table 4.3 Age of the Respondents
Age Frequency Percent
Between 21-30 years 110 42.5
Between 31-40 years 108 41.7
Over 40 years 41 15.8
Total 259 100.0
Work Experience of the Respondents
The study findings on work experience of the respondents showed that 118 (45.6%) of the respondents had work
experience of between 0-5 years, 102 (39.4%) of the respondents had work experience of between 5 to 10 years
and 39 (15.1%) of the respondents had worked for 10 to 15 years. The study showed that respondents provided
accurate information because they had enough experience in their field of work. This is shown in Table 4.4.
Table 4.4 Work Experience of the Respondents
Work Experience Frequency Percent
Below 5 Years 118 45.6
Between 5-10 Years 102 39.4
Between 10-15 Years 39 15.1
Total 259 100.0
Level of Education of the Respondents

The study findings on the level of education showed that 21(8.1%) of the respondents had certificate in their level
of education, 58(22.4%) of the respondents diploma certificate, 54(20.8%) of the respondents had higher diploma,
109(42.1%) of the respondents had bachelor’s degree and finally 17(6.6%) of the respondents had post graduate
degree in their education level. The study results were reliable since majority of the respondents were educated.
This is shown in Table 4.5.
Table 4.5 Level of Education of the Respondents
Level of Education Frequency Percent
Certificate 21 8.1
Diploma 58 22.4
Higher Diploma 54 20.8
Bachelor’s Degree 109 42.1
Post Graduate Degree 17 6.6
Total 259 100.0
Descriptive Findings and Discussions

Descriptive findings and discussions of the study objectives are illustrated in this section. The study findings are
presented in measures of central tendencies which is the means and measures of variation or dispersion which is
the standard deviations. The statistical analyses of the collected data were presented in five-point Likert scale as
follows;
The study sought to determine the effect of technology innovation on growth of SMES in Eldoret town. Table 4.6
presents views of the respondents on the descriptive statistics for technology innovation. The study findings
revealed that respondents agreed (mean ≈ 4.45; Std. Dev > 0.693) that technical innovation has significantly
improved product production. In other statements, respondents were of the opinion (mean ≈ 4.54; Std. Dev >
9|Page
0.605) that Technical innovation has improved delivery method of product. Further, findings revealed that
respondents accepted (mean ≈ 4.50; Std. Dev > 0.587) that Technical innovation has made significant changes in
production techniques. Further, findings revealed that respondents accepted (mean ≈ 4.65; Std. Dev > 0.612) that
Technical innovation has led to changes to advanced production equipment.
The study finding implies that technology innovation positively affects growth of SMES in Eldoret town. Growth
of SMES was achieved through technical innovation which improved product production. These have further
improved delivery method of product and make made significant changes in production techniques and
advancement of production equipment. The study findings were in agreement with Zhao, Lee and Chen, (2011)
results which indicated that firms that focus on technological advancement through innovation research and
development generate above average growth. They noted that product process development through technology
has been identified as the key for commencing novel activities through risk-taking and firm proactively which
results in a firm’s higher growth than competitors.
The study findings also agreed with findings of Quatraro and Vivarelli (2014) that firms that employ technology
in their product development are known for superior growth because they believe in acquisition of new
technologies for product innovation, research and development which enables the firm to produce unique products
which are hard to copy. Ocheni and Nwankwo (2012) noted that technology deserves consideration since it
pursues opportunities and renewal of new market from the areas of operation that are existing to match with the
changing needs of the customers in the market. Kariithi (2017) found out that customers choose technologically
superior products and services and that customers stick to a firm that has the capability to react to their choices in
a successful way.
Table 4.6 Descriptive Statistics of Technology Innovation

Statement SA A N D SD Tota Mean Std.
l Dev
Technical innovation has F 143 92 21 3 0 259 4.45 .693
significantly improved product % 55.2 35.5 8.1 1.2 0.0 100
production
Technical innovation has improved F 152 96 9 2 0 259 4.54 .605
delivery method of product % 58.7 37.1 3.5 0.8 0.0 100
Technical innovation has made F 140 109 9 1 0 259 4.50 .587
significant changes in production % 54.1 42.1 3.5 0.4 0.0 100
techniques
Technical innovation has led to F 183 66 7 2 1 259 4.65 .612
changes to advanced production % 70.7 25.5 2.7 0.8 0.4 100
equipment
Growth of Small Medium Enterprises

The study sought to determine growth of small medium enterprises. Table 4.7 presents views of the respondents
on the descriptive statistics for growth of small medium enterprises. The study findings on growth of small
medium enterprises revealed that respondents opined (mean ≈ 4.21; Std Dev > 0. 838) that Innovation has
improved service and product outcome on Growth of small medium enterprises in Eldoret Town. The study also
agreed (mean ≈ 3.81; Std. Dev > 1.007) that the Growth of small medium enterprises has increased since the
innovation was adopted. In the other hand the study revealed (mean ≈ 4.00; Std. Dev > 0. 930) that the cost of
installing innovative techniques is expensive for macro enterprise business.
The study findings revealed that innovation has improved service and product outcome hence growth of small
medium enterprises in Eldoret Town since the time innovation was adopted. However, they face the challenge
installing innovative techniques which is slightly expensive. The study findings agreed with Taylor and Taylor
(2014) that small and medium-sized enterprises growth is evaluated in terms innovation where they can survive
and compete favorably in the market. Growth of small and medium enterprises faces challenge in measuring the
effectiveness of adopting technological innovations in their operations because most of the measurements are
based on large firms. An effective growth measurement strategy can indicate the degree of success of
implementing technological innovations in a firm.
10 | P a g e
Study findings also agreed with Mugane (2015) who established SMEs growth has made all profit seeking
enterprises to constantly adapt to new and improved products, services and organizational structures that can
reduce their costs of production, satisfy their customers’ needs better and yield higher profits. Customers demand
for variety, convenience and new services. They want products that can meet their precise, individual needs.
Table 4.7 Descriptive Statistics of Growth of Small Medium Enterprises

Statement SA A N D SD Tota Mean Std.
l Dev
Innovation has improved service F 111 104 33 10 1 259 4.21 .83
and product outcome on Growth of % 42.9 40.2 12.7 3.9 0.4 100
small medium enterprises in
Eldoret Town
Growth of small medium F 76 87 73 17 6 259 3.81 1.0
enterprises has increased since the % 29.3 33.6 28.2 6.6 2.3 100
innovation was adopted
The cost of installing innovative F 92 91 61 13 2 259 4.00 .93
techniques is expensive for macro % 35.5 35.1 23.6 5.0 0.8 100
enterprise business
Inferential Analysis
This section presents the results of regression model assumptions, correlation analysis and multiple regression
analysis. The results show the relationship between dependent variable growth of small and medium-sized
enterprises in Eldoret town and independent variables (product innovation, process innovation, technology
innovation and marketing innovation).
Correlation Analysis Results

Correlation analysis was performed to determine the correlation between product innovation, process innovations,
technology innovations, marketing innovation and growth of SMES in Eldoret town. Pearson’s product –moment
correlation (r) was used to determine the relationship between the independent variables and dependent variable
to assess both the direction and strength. Each of independent variables and dependent variable where correlation
coefficient (r=between +1 and -1) measures the strength and direction of a linear relationship between each of
independent variables and dependent variable. The established relationship between dependent variables and
independent variable was described in Table 4.8.
Table 4.17 shows the correlations analysis between the dependent and independent variables. It revealed that
technology innovations was very strong positively and statistically significant (r=0. 705, p<0.05). This gives and
implication that all the study variables, technology innovations, were positively and very strong correlated to
growth of SMES in Eldoret town. As per Thanoon, Adnan and Saffari (2015) Pearson Correlation of r=+0.7
indicates a very strong relationship; r=+0.5 to below 0.7 indicates a strong relationship; r=+0.3 to +0.49 indicates
a moderate relationship and r=.029 and below indicates a weak relationship. Where r= 0 it indicates that there is
no relationship. However r value of +1 shows a perfect linear relationship.
Table 4.8 Correlations Analysis Results
Growth SMEs Technology Innovations
Growth SMEs Pearson Correlation 1

Sig. (2-tailed)
Technology Innovations Pearson Correlation .705** 1
Sig. (2-tailed) .000

Multiple Regression Analysis Results
In this section the study presents the results multiple regression analysis which was used to determine the linear
statistical relationship between product innovation, process innovations, technology innovations, marketing
innovation and growth of SMES in Eldoret town. The study results were presented in table 4.9, 4.10 and 4.11.
11 | P a g e
Model Summary
Model summary provides the coefficient of determination (R2) which shows proportion of the variance in the
dependent variable that is predictable from the independent variable and correlation coefficient (R) shows the
degree of association between the dependent and independent variables. The results in table 4.18 Indicated that
R2 value was 0. 718 and R value was 0. 847. R value gives an indication that there was a strong linear relationship
between business innovation strategies employed and growth of small and medium-sized enterprises in Eldoret
town. The R2 indicates that explanatory power of the independent variable was 0.718. This implies that about
71.8% of the variation in business innovation strategies employed and growth of small and medium-sized
enterprises in Eldoret town was explained by the regression model while 28.2% was unexplained by the model.
Adjusted R2 is a modified version of R2 that has been adjusted for the number of predictors in the model by less
than chance. The adjusted R2 of 0.714 which was slightly lower than the R2 value was exact indicator of the
relationship between the independent and the dependent variable because it is sensitive to the addition of irrelevant
variables. The adjusted R2 indicates that 71.4% of the changes in business innovation strategies employed are
explained by the model while 28.6% was not explained by the model. This implies that business innovation
strategies employed has a strong effect on growth of small and medium-sized enterprises in Eldoret town.
Table 4.9 Multiple Regression Model Summary
Model R R Square Adjusted R Std. Error of Durbin-
Square the Estimate Watson
1 .847 .718 .714 .43437 .969

Table 4.10 presents results on F test which provides an overall test of significance of the fitted regression model.
The F value indicates that all the variables in the equation are important hence the overall regression is significant.
The overall regression model was significant because F-statistics produced (F-computed=161.58>F-tabulated)
was significant at (p<0.05) thus confirming the fitness of the model. Therefore, there was statistically significant
effect of business innovation strategies on growth of small and medium-sized enterprises in Eldoret town. This
means that the independent variable was a significant predictor of the dependent variable.
Table 4.10 ANOVA Results
Model Sum of df Mean F Sig.
Squares Square
1 Regression 122.161 4 30.540 161.58 .000
Residual 47.925 254 .189

Total 170.086 258
Table 4.11 presented study results on statistical significance of each individual regression coefficient. The β
coefficients were all significant to be used for multiple regression as follows; technology innovations (β 3=0.193,
p<0.05). This an implication that a unit increase in product innovation caused 0.142 unit growth of small and
medium-sized enterprises in Eldoret town, a unit increase in process innovations caused 0.411 unit growth of
small and medium-sized enterprises in Eldoret town, a unit increase in technology innovations caused 0.193 unit
growth of small and medium-sized enterprises in Eldoret town and a unit increase in marketing innovation caused
0.164 unit growth of small and medium-sized enterprises in Eldoret town. Therefore the multiple regression model
equation was developed from the coefficient as shown in equation 4.1;
Y= 0.339+ 0. 193X3 ……………………………………………………………..Equation 4.1
Table 4.11 Regression Analysis Coefficients
Unstandardized Coefficients Standardized
Coefficients
B Std. Error Beta t Sig.
(Constant) 0.339 0.158 2.146 0.033
Technology Innovations 0.193 0.051 0.192 3.796 0.000
12 | P a g e
The null Hypothesis H01 stated that technology innovation has no statistical significant effect on Growth of SMES
in Eldoret town. However, the study findings revealed that technology innovation has a positive and statistically
significant effect on growth of SMEs in Eldoret town (β3=0.193, p=0. 000<0.05). Therefore, the study findings
rejected the null hypothesis. The study results concur with Kuswantoro (2012) who revealed that technology
innovation is positively related to overall SME’s growth. The study results indicated that entrepreneurial
orientations via technological innovativeness to be positively associated with SMEs growth. Consistently in
Turkey context examined innovation and SME’s growth in automotive industry (Atalay, 2013). Their results
demonstrated that technological innovation (product and process innovation) has significant and positive impact
on SME’s growth, but no evidence was found for a significant and positive relationship between non-technological
innovation and SME’s growth.
5.0 Summary, Conclusions and Recommendations

The study findings revealed that technology innovation has a positive and statistically significant effect on growth
of SMEs in Eldoret town. Technical innovation has significantly improved product production as well as delivery
method of product. This was achieved through significant changes in production techniques and changes to
advanced production equipment. The study finding implies that technology innovation positively affects growth
of SMES in Eldoret town. Growth of SMES was achieved through technical innovation which improved product
production. These have further improved delivery method of product and make made significant changes in
production techniques and advancement of production equipment.
Conclusions of the Study

The study conclusion was based on objectives which were to; determine the effect of product innovation on growth
of SMES in Eldoret town, establish the effect of technology innovation on growth of SMES in Eldoret town on
growth of SMES in Eldoret town. The study concluded that technology innovation employed by SMEs in Eldoret
town has a positive effect on its product. Technology innovation is the key in pursuing new opportunities and
renewal of new market from the areas of operation that are existing in order to match with the changing needs of
the customers in the market. This is because customers choose technologically superior products and services and
that customers stick to a firm that has the capability to react to their choices in a successful way.
The study findings concur Innovation Diffusion Theory was developed by Rogers in 1995 due to the fact that the
theory explains the adoptability of SMEs to generate innovative ideas in place and implement the ideas and finally
adopting the one that suits the organization in terms of operationalization and functionality of the innovative ideas
the organization came up with. For this reasons the complexity, compatibility, trial ability and observability of the
innovation ideas definitely can lead to organization growth and even development of new innovation in future
times.
Recommendations of the Study

The study recommends to the SMEs managers to ensure that they seek consumer need, want and taste before
embarking on production to ensure customers satisfaction in their products. The management should planned
marketing innovation strategy for the product at all level of its level of its life which includes pruning of brands,
improve upon them, and rename them to reflect improvement on them. SMEs should always focus on
technological advancement through innovation research and development generate above average growth. This
will enables the SMEs to produce unique products which are hard to copy.
The study recommends policy makers to formulate positive national policies on a framework that is relevant and
sensitive to business forces influencing the SMEs sector in Kenya. This will expand their knowledge on business
innovation in the SMEs and also identify areas of further study.
The study recommends the use of Innovation Diffusion Theory was developed by Rogers in 1995 to generate
innovative ideas in place and implement the ideas and finally adopting the one that suits the organization in terms
of operationalization and functionality of the innovative ideas the organization came up with.
Suggestions for Further Research
The study has achieved to determine the effect of business innovation strategies on growth of small and medium-
sized enterprises in Eldoret town. Therefore the study suggests further research to be done on how the business
innovation strategies can be adopted by all firms in order to improve their products.
13 | P a g e
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Effect of Technology Innovation On Growth of Small Medium Enterprises in Eldoret Town

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and Procurement (IJSMP) ISSN: Applied for 1

Effect of Technology Innovation on

Type of the Paper: Research Paper.

Chirchir K. S. and Akuku C., (2019). Effect of Technology Innovation on Growth of

International Journal of Strategic Management and Procurement (IJSMP)

Effect of Technology Innovation on Growth

Statement of the Problem

Innovation Diffusion Theory

Technology Innovation and Growth of SMES

Independent Variables Dependent Variable

Sample Size and Sampling Technique

Data Collection Instruments

Data Collection Procedures

Data Analysis and Presentation

Pilot Study Results

Age of the Respondents

Level of Education of the Respondents

Descriptive Findings and Discussions

Table 4.6 Descriptive Statistics of Technology Innovation

Growth of Small Medium Enterprises

Table 4.7 Descriptive Statistics of Growth of Small Medium Enterprises

Correlation Analysis Results

Growth SMEs Pearson Correlation 1

Sig. (2-tailed) .000

1 .847 .718 .714 .43437 .969

Residual 47.925 254 .189

5.0 Summary, Conclusions and Recommendations

Conclusions of the Study

Recommendations of the Study

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