Title: Fostering innovation adoption for enhanced SME performance: evidence from Addis Ababa's manufacturing sector

Authors: Nigus Tadesse Beshe; Mari Jansen van Rensburg

Addresses: Department of Management, Debre Berhan University, Ethiopia ' Middlesex University, Flic-en-Flac, Mauritius

Abstract: SMEs operating in transition economies, serving customers with limited purchasing power, demand frugal innovation to succeed in saturated markets with low-value and low-technology products. These SMEs rely on pricing strategies for survival and leverage internal resources and capabilities to enhance value or reduce costs. This study, conducted in Addis Ababa, Ethiopia's manufacturing sector, explores the link between innovation adoption and SME performance. Quantitative data from 692 respondents were analysed using structural equation modelling. Results indicate a significant correlation between innovation adoption and firm performance, attributed to human and financial resources investments and supportive organisational culture. External environmental factors had minimal impact on innovation adoption or performance. These findings provide valuable insights for policymakers and decision-makers aiming to support innovation adoption and SME performance. Findings emphasise the significance of contextual distinctions and the value of innovation studies within the unique business environment in which it operates.

Keywords: innovation adoption; firm resources; business environment dynamics; SMEs' performance; market orientation.

DOI: 10.1504/IJESB.2025.149947

International Journal of Entrepreneurship and Small Business, 2025 Vol.56 No.4, pp.508 - 528

Received: 05 Jan 2024
Accepted: 04 Apr 2024
Published online: 19 Nov 2025 *

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