Effect of Innovative Practices on Business Performance among Bakery and Confectionery MSMEs in Kisumu County, Kenya
Main Article Content
Keywords
Innovative Practices, Business Performance, Bakery and Confectionery MSMEs, EntreComp, Balanced Scorecard, Kisumu County, Kenya
Abstract
Bakery and confectionery micro, small and medium enterprises (MSMEs) in Kisumu County, Kenya, operate within an environment of intense price competition, volatile input costs, and annual failure rates as high as 60 percent, yet they remain critical to local employment and food security. Despite the documented importance of innovation for firm competitiveness, the effect of innovative practices on the performance of this under-researched sector in western Kenya remains empirically unexplored. This study examines the effect of innovative practices on business performance among bakery and confectionery MSMEs in Kisumu County, Kenya. Anchored in the European Entrepreneurship Competence Framework (EntreComp) and the Balanced Scorecard (BSC) Model, the study adopted a positivist paradigm and cross-sectional survey design. A census of 268 bakery and confectionery MSME owners and managers was conducted using structured five-point Likert-scale questionnaires. Innovative practices were operationalised through four EntreComp-aligned items, while business performance was measured across four BSC perspectives. Data were analysed using descriptive statistics, exploratory factor analysis, correlation analysis, and hierarchical multiple regression. Descriptive results indicated strong adoption of innovation practices overall, with customer feedback utilisation (M = 4.64) and active knowledge-seeking (M = 4.62) recording the highest means, while new product introduction showed greater variability (M = 3.98, SD = 1.22). Innovative practices were strongly and positively correlated with business performance (r = 0.653, p < 0.05). Further, hierarchical regression confirmed that innovative practices exerted a strong, positive, and statistically significant effect on business performance (β = 0.335, p < 0.001), explaining 53.2 percent of the variance in the composite performance measure. The relationship remained robust after controlling for firm size and business location. The findings indicate that innovation is not an elite strategic option but an operational imperative even for home-based, capital-constrained micro-enterprises. Policymakers and business development service providers should prioritise low-cost, high-impact innovation support such as customer-oriented product development training, quality improvement routines, and modest technology adoption over capital-intensive equipment subsidies.
Downloads
References
Ali, A., Ali, A., & Ali, A. (2020). Innovation capabilities and SME performance: A qualitative study of Chinese manufacturing SMEs. International Journal of Innovation Management, 24(6), 2050045. https://doi.org/10.1142/S1363919620500458
Aslam, M., Shafi, I., Ahmed, J., de Marin, M. S. G., Flores, E. S., Gutiérrez, M. A. R., & Ashraf, I. (2023). Impact of innovation-oriented human resource on small and medium enterprises' performance. Sustainability, 15(7), 6273. https://doi.org/10.3390/su15076273
Ayinaddis, S. G. (2023). The effect of innovation orientation on firm performance: Evidence from micro and small manufacturing firms in selected towns of Awi Zone, Ethiopia. Journal of Innovation and Entrepreneurship, 12(1), 26. https://doi.org/10.1186/s13731-023-00305-5
Bacigalupo, M., Kampylis, P., Punie, Y., & Van den Brande, G. (2016). EntreComp: The entrepreneurship competence framework. Publications Office of the European Union. https://doi.org/10.2791/593884
Bernadó, E. (2024). Revisiting EntreComp through a systematic literature review of entrepreneurial competences: Implications for entrepreneurship education and future research. The International Journal of Management Education, 22(3), Article 100818. https://doi.org/10.1016/j.ijme.2024.100818
Christa, C., & Kristinae, K. (2021). [Title needed: Please verify full bibliographic details]. [Journal/Publisher needed].
Christa, U., & Kristinae, V. (2021). The effect of product innovation on business performance during COVID 19 pandemic. Uncertain Supply Chain Management, 9(1), 151-158.
Creswell, J. W., & Creswell, J. D. (2018). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). SAGE Publications.
Donkor, J., Donkor, G. N. A., Kankam-Kwarteng, E., & Donkor, J. (2018). Innovative capability, strategic goals and financial performance of SMEs in Ghana. Asia Pacific Journal of Innovation and Entrepreneurship, 12(2), 238–254. https://doi.org/10.1108/APJIE-05-2018-0028
Gligah, F. G., & Zaidin, N. (2023). Product innovation capability and organisational performance of manufacturing SMEs in Ghana. Journal of Small Business and Enterprise Development, 30(3), 456–478. https://doi.org/10.1108/JSBED-09-2021-0378
Jalil, M. F., Ali, A., & Kamarulzaman, R. (2022). Does innovation capability improve SME performance in Malaysia? The mediating effect of technology adoption. The International Journal of Entrepreneurship and Innovation, 23(4), 253–267. https://doi.org/10.1177/14657503211048967
Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard—measures that drive performance. Harvard Business
Review, 70(1), 71–79. https://hbr.org/1992/01/the-balanced-scorecard-measures-that-drive-performance-2
Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: Translating strategy into action. Harvard Business School Press. https://www.hbs.edu/faculty/Pages/item.aspx?num=8831
Kenya Institute for Public Policy Research and Analysis. (2020). MSEs' business environment in Kisumu County [Policy brief]. KIPPRA Repository. https://repository.kippra.or.ke/bitstreams/f99446ca-99f6-43e3-a93a-8bcc90d77d90/download
Kenya National Bureau of Statistics. (2016). Micro, small and medium establishment (MSME) survey 2016. Government Printer. https://www.knbs.or.ke/
Kiilu, J. M., & Kithae, P. P. (2020). Entrepreneurial innovation processes and firm performance in Kenya: A case of SMEs in Nairobi County. International Journal of Management and Leadership Studies, 2(1), 48–58.
Kim, S., & Han, J. (2021). [Title needed: Please verify full bibliographic details]. [Journal/Publisher needed].
Kimathi, B. M., Mukulu, E., & Odhiambo, R. (2019). Effect of innovation on the performance of small and medium enterprises in Kenya. International Journal of Entrepreneurship, 2(1), 15–28. https://doi.org/10.47672/ije.381
Kiveu, M. N., Namusonge, M., & Muathe, S. (2019). Effect of innovation on firm competitiveness: The case of manufacturing SMEs in Nairobi County, Kenya. International Journal of Business Innovation and Research, 18(3), 307–327. https://doi.org/10.1504/IJBIR.2019.098251
Lee, C., Lee, K., & Pennings, J. M. (2019). Innovation financing and technological innovation competency: Evidence from South Korean SMEs. Asian Journal of Technology Innovation, 27(2), 1–18. https://doi.org/10.1080/19761597.2019.1625678
Majau, D. K., & Ragui, M. (2016). Influence of technological innovation on performance of small and medium enterprises in Nanyuki town, Laikipia County, Kenya [Research report]. Research Publish. https://www.researchpublish.com/upload/book/INFLUENCE%20OF%20TECHNOLOGICAL%20INNOVATION-5174.pdf
Malagueño, R., Lopez-Valeiras, E., & Gomez-Conde, J. (2018). Balanced scorecard in SMEs: Effects on innovation and financial performance. Small Business Economics, 51(1), 221–244. https://doi.org/10.1007/s11187-017-9921-3
Mbogo, D. (2025). Growth strategies and performance of bakeries in Nairobi City County, Kenya [Master's research project, Kenyatta University]. Kenyatta University Institutional Repository.
Mbogo, D., & Waithaka, P. (2024). Market penetration strategy and performance of bakeries in Nairobi City County. The Strategic Journal of Business & Change Management, 11(4), 1279–1295. https://doi.org/10.61426/sjbcm.v11i4.3156
Micro and Small Enterprises Authority. (2024). Country-led, country-owned: National perspectives on building MSME resilience and formalization [Presentation]. United Nations Department of Economic and Social Affairs. https://sdgs.un.org/sites/default/files/2024-11/Kenya%20presentation%20session%204.pdf
Njiraini, P., Gachanja, P., & Omolo, J. (2018). Factors influencing micro and small enterprise's decision to innovate in Kenya. Journal of Global Entrepreneurship Research, 8, Article 34. https://doi.org/10.1186/s40497-018-0132-4
Podsakoff, P. M., MacKenzie, S. B., Lee, J. Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903. https://doi.org/10.1037/0021-9010.88.5.879
Purwanto, A., Asbari, M., & Hyun, C. C. (2022). Innovation capability and open innovation on SME performance during COVID-19 pandemic: Evidence from Indonesian batik SMEs. Cogent Business & Management, 9(1), 2093964. https://doi.org/10.1080/23311975.2022.2093964
Quintero Sepúlveda, J. D., & Zúñiga Collazos, A. A. (2025). Innovation capabilities, innovation strategies and financial performance among SMEs. Journal of Innovation and Entrepreneurship, 14(1), Article 15. https://doi.org/10.1186/s13731-025-00452-3
Rosenbusch, N., Brinckmann, J., & Bausch, A. (2011). Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs. Journal of Business Venturing, 26(4), 441–457. https://doi.org/10.1016/j.jbusvent.2009.12.002
Sakib, M. N., Rabbani, M. R., Hawaldar, I. T., Jabber, M. A., Hossain, J., & Sahabuddin, M. (2022). Entrepreneurial competencies and SMEs’ performance in a developing economy. Sustainability, 14(20), 13643. https://doi.org/10.3390/su142013643
Saunila, M., Pekkola, S., & Ukko, J. (2014). The relationship between innovation capability and firm performance: The moderating effect of performance measurement. International Journal of Productivity and Performance Management, 63(2), 234–249. https://doi.org/10.1108/IJPPM-04-2013-0065
Saunila, M., Ukko, J., & Rantanen, H. (2014). Does innovation capability really matter for the profitability of SMEs? International Journal of Innovation Management, 18(6), 1450038. https://doi.org/10.1142/S1363919614500386
Suttipun, M., Stanton, J., & Stanton, P. (2023). Innovation in human resource practices, innovation capabilities, competitive advantage and SME performance in Thailand. Asia Pacific Business Review, 29(3), 1–20. https://doi.org/10.1080/13602381.2022.2156789
Thaimuta, J. M., Ngugi, P. K., & Nyang'au, S. (2024). Entrepreneurial innovation competence and growth of micro and small enterprise in Nairobi County. International Journal of Entrepreneurship and Project Management, 9(2), 31–43. https://doi.org/10.47604/ijepm.2567
Tolve, A., Ianieri, G., Bianchi, F., & Paciarotti, C. (2025). The digital revolution in the bakery sector: Innovations, challenges, and opportunities from Industry 4.0. Foods, 14(3), 526. https://doi.org/10.3390/foods14030526
Wanyonyi, N. J., Mokaya, S. O., & Omwenga, J. (2026). Innovation competency and the performance of women-owned small and medium enterprises in Kenya. Journal of Economics, Finance and Management Studies, 9(6), 3311–3315. https://doi.org/10.47191/jefms/v9-i6-48
Article Sidebar
Article Details
Ruth Adhoch Odhiambo , Department of Tourism, Hospitality and Events Management, School of Tourism, Hospitality and Events Management, Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Department of Tourism, Hospitality and Events Management,
School of Tourism, Hospitality and Events Management,
Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Rita Nthiga , Department of Tourism, Hospitality and Events Management, School of Tourism, Hospitality and Events Management, Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Department of Tourism, Hospitality and Events Management,
School of Tourism, Hospitality and Events Management,
Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Beatrice Imbaya , Department of Tourism, Hospitality and Events Management, School of Tourism, Hospitality and Events Management, Moi University, P.O. Box 3900-30100, Eldoret, Kenya
Department of Tourism, Hospitality and Events Management,
School of Tourism, Hospitality and Events Management,
Moi University, P.O. Box 3900-30100, Eldoret, Kenya