Strategic Innovation and Competitive Advantage of SMEs in Ethiopia

Abstract

Small and medium-sized businesses play an indispensable role in the economy's development because they foster the introduction of new technologies, promote science, boost innovation performance, aid in the framework for policymaking, and are one of the areas where innovation research is currently receiving a lot of attention. The main goal of this investigation was to determine the competitive advantage, human capital, and strategic innovation of Ethiopian SMEs. The researchers used an explanatory research strategy for this work, which is backed by a quantitative methodology. A multi-stage sampling technique was used since it allows for a systematic and representative selection procedure in choosing respondents. The researchers used a structured questionnaire to gather information from the 282 sample respondents. With the use of explanatory and confirmatory factor analysis (EFA and CFA), the researchers employed SEM to examine the data gathered from the respondents. According to the study's outcomes, strategic innovation is what allows SMEs to get a competitive edge. The findings also demonstrated a strong and positive link among competitive edge as well as innovative strategy. The results of this research also showed that competitive advantage is directly impacted by human resource, confirming the idea that human capital significantly boosts competitive advantage. Lastly, the research showed that human capital plays partial mediating role in the relationship among competitive advantage and strategy innovation. This study recommends that SMEs invest in strategic innovation and human capital development to enhance competitive advantage. Future research should investigate sector-specific factors affecting innovation and investigate the long-term influence of human capital on competitive dynamics in different economic contexts.