Kenya: Qualitative Study on Innovation in Manufacturing Small and Medium Sized Enterprises (SMEs): Exploration of Policy and Research Issues

Abstract

The promotion of innovation in Low Income Countries (LICs) has recently appeared on the agenda of policymakers and international development agencies. Many agree that innovation is crucial in these countries, because it is fundamental for growth in order to catch up with middle and high income economies (Chaminade et al., 2010). Current research, theory development and policy formulation to promote innovation, however, have mainly focused on innovation in the more advanced economies, whilst investigation of these issues in low income countries to date has been limited. The 4-year research project ‘Enabling Productivity and Innovation in Low Income Countries, (EIP-LIC)’ funded by the British Department for International Development (DFID) and commissioned to Tilburg University, aims to fill research gaps on innovation in LICs from an economic perspective. EIP-LIC focuses on manufacturing Small and Medium-sized Enterprises (SMEs) in LICs. Promoting innovation in these enterprises has a particularly positive impact on development (Szirmai et al., 2011); SMEs are usually operating on the edge of the formal and informal sector and have low levels of productivity and ompetitiveness. Compared to the agriculture and services sectors, manufacturing in LICs is typically characterised by a limited share of the total GDP. Innovation within SMEs in manufacturing enables these enterprises to raise productivity and grow, resulting in a better-balanced economic structure while generating employment opportunities for poorer groups and contributing to poverty reduction. Moreover, promoting innovation in domestic manufacturing is a way towards import substitution and increases the competitive (export) position of firms on the world market