Drivers of Technological Innovations: Evidence from Kenya’s Micro and Small Enterprises

Abstract

Growth of micro and small enterprises (MSEs) is fundamental to the Kenyan economy. These enterprises play a pivotal role in Kenya’s overall economic growth. In spite of the role that MSEs play, their growth is usually constrained by a host of factors. One avenue through which enterprises enhance their growth and survival is through technological innovation. In Kenya, the knowledge on how technological innovation can be harnessed to facilitate MSEs growth is nascent and inconclusive at best. This paper uses a knowledge production function approach to analyze factors that can be used to drive the innovation capability of MSEs. It uses a bivariate probit model and data from World Bank Enterprise Survey data for 2013 to examine some of the key drivers of process and product innovations amongst MSEs. Results from the study identified enhanced capital intensity, increased foreign partnership, listing in the capital markets and a focus beyond local markets as some of the factors that influence technological innovations. Meanwhile policies aimed at enhancing technological innovation should target more of the newly established MSEs