FIRMS’ PERFORMANCE AND INNOVATION: EVIDENCE FROM SMALL AND MEDIUM ENTERPRISES (SMES) IN NIGERIA

Abstract

The effect of innovations on the performance of SMEs in Nigeria was studied in this study using firm-level data from the Enterprise Survey Panel Data for the years 2007-200. Meanwhile, to investigate the relationships between innovation outcomes and firms’ performance, we used static panel data models. The Hausman test statistic, which Hausman created, was used to choose between fixed and random effects estimators. The result showed that 52.05 percent of the 1729 companies polled claimed they had developed a new or significantly improved product, and 52.54 percent said they had developed a new or significantly better process. In the last three years, however, less than half of the organizations (41.87 percent) had undergone organizational transformation. Finally, we noticed that there was a transition from one form of innovation to another throughout time. Furthermore, there was a significant and favorable link between innovation outcomes and R&D spending, as well as employee training. The studies also demonstrated a positive and statistically significant link between firm’s productivity and innovation outcomes. As a result, we recommend that the government encourage strategic coordination of both human and non-human capital in SMEs, such as R&D personnel, FDI inflows, technology, and information. Increased access to funds for research and innovation in formal institutional contexts, as well as policy packages that are highly supportive of innovation