Entrepreneurship, innovation and firm performance: an empirical study of micro and small enterprises in Nairobi, Kenya

The spectacular ubiquity of micro and small enterprises (MSEs) in developing countries suggests high levels of entrepreneurship, while the artistic variety of their products implies high creativity and innovation. In spite of such entrepreneurial verve, MSEs in developing countries return low productivity and stunted growth. Towards understanding this paradoxical phenomenon, this thesis proffers the following: Firstly, given the prodigious nature of the entrepreneurship concept, the small firm is conceptualised as an instance of entrepreneurship. In turn, a more exacting specification of particular elements of small firms, for example, precise productivity and growth determinants, is advocated. Secondly, to elucidate the link between innovation and growth, this thesis avers that innovation inputs, such as investments in research and development, should be conceptually distinguished from observed ‘novation’. The later is termed enovation. As such, product enovation, such as that characterising artisanal firms, may be observed independent of R&D inputs. Espousing these conceptualisations, this thesis conducts an empirical study of the effect of product enovation on firm productivity and employment growth amongst garment-making micro and small firms in Nairobi, Kenya. The findings suggest that while innovation efforts (R&D) is a significant driver of productivity, product enovation in itself has no impact on firm performance