INNOVATION STRATEGIES AND PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN THE COSMETICS SECTOR IN NAIROBI CITY COUNTY, KENYA

Hassan, S. H. - MBA Strategic Management Student, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology, Kenya

Dr. Enos Anene (PhD) - Lecturer, School of Business and Economics, Jomo Kenyatta University of Agriculture and Technology, Kenya

ABSTRACT

Purpose: Despite operating in a rapidly growing sector, cosmetics SMEs have exhibited fluctuating financial performance over the past five years, reflected in inconsistent trends in ROA, market share, and revenue growth. The study examined the effect of innovation strategies on the performance of cosmetics small and medium-sized enterprises (SMEs) in Nairobi City County, Kenya. The study was anchored on the diffusion of innovation theory. Methodology: The study adopted a descriptive research design targeting 600 registered cosmetics SMEs operating in Nairobi City County. A stratified random sampling technique was employed to ensure proportional representation of manufacturers, wholesalers, and retailers, resulting in a sample size of 240 SMEs. Primary data were collected using structured questionnaires administered to business managers, one from each selected firm, and complemented by secondary financial data. Prior to the main study, a pilot study involving 24 respondents was conducted to assess the validity and reliability of the research instrument. The pilot study achieved a response rate of 83.3%. Content validity results yielded an overall Content Validity Index (CVI) of 0.86, while construct validity was confirmed through factor analysis, with all factor loadings exceeding the recommended threshold of 0.50. Reliability results indicated satisfactory internal consistency, with Cronbach’s Alpha coefficients ranging from 0.804 to 0.873 and an overall reliability coefficient of 0. 836.Data were analyzed using descriptive and inferential statistics, including Pearson’s Product–Moment Correlation and multiple linear regression analysis. Findings: The findings established that innovation strategies had a positive and statistically significant effect on the performance of cosmetics SMEs. The regression model explained 69.1% of the variation in SME. Recommendations: The study recommends that SME managers prioritize continuous innovation to enhance competitiveness and long-term sustainability. Policymakers should formulate supportive policies that promote innovation, facilitate access to finance, strengthen SME capacity-building programs for cosmetics SMEs.

Full Length Research (PDF Format)