Innovation and operational performance of small and medium enterprises in Nairobi city county

SMEs play a crucial role in employment, wealth creation and economic development in \nany country across the globe. Their importance is more so crucial in Kenya where the \npoverty rate stands at forty two percent and unemployment rate at forty percent. They \ncreate eighty percent of employment and contribute twenty percent to the national gross \ndomestic product. However, sixty percent of these firms fail within the first three years of \noperation. This has necessitated a rethink of how SMEs operate. This has resulted in \nthese firms innovating. This study was conduction to determine the effect of innovation \non the operational performance of small and medium enterprises in Nairobi County. The \nobjectives of the study were to identify innovations practiced, identify the factors that \ninfluence adoption of innovation and determine the effect these innovations had on the \noperational performance of these firms. The researcher used a cross-sectional descriptive \nresearch design for this research. The population of the study was small and medium \nenterprises in Nairobi County. The researcher used judgmental sampling method to select \none hundred and fifty SMEs to represent the population. Questionnaires were used as the \ntools for data collection. The data was analyzed using descriptive statistics such as \nmeans, standard deviations and frequency distributions. The findings from the study \nestablished that innovation was widely practiced in SMEs. Factors such as employee \ntraining programs, competitive pressures and market segments served were identified to \nhave a large influence on adoption of innovation. The study also established that \ninnovation resulted in improved operational performance in the practicing firms. It was \nrecommended that SMEs in Nairobi County should continually practice innovations this \nwould lead to better performance. The study also recommended that the government \nshould offer incentives for innovation and also roll out training programs for owners and \nemployees of these firms.