Effect of Innovation Strategies on SMEs Performance in Karu LGA, Nasarawa State, Nigeria

Abstract

This study examines the effect of innovation strategies on small and medium enterprises performance in Karu Local Government Area, Nasarawa State. The objectives are to investigate how product and process innovation influence the performance of small and medium enterprises (SMEs) in Karu. This study is guided by the Resource-Based View (RBV) Theory proposed by Barney (1991), which emphasizes that unique internal resources and capabilities drive competitive advantage. This study adopts a survey research design, targeting 267 registered SMEs in Karu, from which a valid sample of 205 responses was obtained using a census sampling technique. Primary data were collected through a structured 5-point Likert scale questionnaire and analyzed using Partial Least Squares Structural Equation Modelling (PLS-SEM) via SmartPLS software. The findings reveal that both product innovation (β = 0.123, p = 0.026) and process innovation (β = 0.678, p = 0.000) have positive and statistically significant effects on SMEs performance, jointly explaining 54.7% of its variance. The study concludes that innovation strategies are critical drivers of SME growth, productivity, and competitiveness. It recommends that SMEs strengthen product innovation through continuous product development and differentiation while investing in process innovation through technology adoption and operational efficiency improvement. The study implies that SMEs that effectively leverage innovation as a strategic resource can enhance their adaptability, market relevance, and long-term sustainability.