Interplay between Technological Innovation and Employee Skills in Accelerating Small Medium Enterprise Growth

Interplay between Technological Innovation and Employee Skills in Accelerating Small Medium Enterprise Growth

Peter Paul Kithae¹, and Rosalid Githendu²,

¹Associate Professor, The management University of Africa

²Masters student, The management University of Africa

DOI: https://dx.doi.org/10.47772/IJRISS.2023.7011057

Received: 16 October 2023; Revised: 31 October 2023; Accepted: 02 November 2023; Published: 07 December 2023

ABSTRACT

Past statistics have shown that among five SMEs start-ups, three of them dissolve before a lifespan of five years. There are numerous factors that affect SMEs growth among them technology and employee skills. It would be important to consider the influence of technology and employee skills on the growth of SMEs. This study investigating the inter play between technological innovation and employee skills in accelerating the Small Medium Enterprise (SMEs) growth. A descriptive research design was applied to implement the study targeting a total population of 174 firms. This study employed stratified random sampling technique to categorize the firms in to three different sections of interior design firms, interior decoration firms and architectural firms as they show different heterogeneous characteristics. A sample of 54 respondents was selected from the population using simple random sampling. Questionnaires were the main primary data collection instruments. A pilot study was used to confirm content validity of the data gathering instruments while the Cronbach’s coefficient alpha was used to establish reliability. Quantitative data collected was analyzed using descriptive statistics and expressed as percentages and frequencies. Chi square test was conducted to test the relationship between the independent and dependent variables. Besides, regression analysis was done to determine the extent to which the independent variables influenced SMEs growth. Inferential statistics was tested at 95% confidence level and p-value ≤ 0.05. The chi square results indicated that employee skills were significantly associated with SMEs sales (χ²=9.000, p=0.03), profits (χ²=20.700, p=0.002) but not net assets (χ²=3.706, p=0.282) and number of employees (χ²=2.753, p=0.427). Further, technological innovation was significantly associated with SMEs sales (χ²= 8.322, p=0.040), profits (χ²=9.584, p=0.022) net assets (χ²=13.846, p=0.004) but not the number of employees (χ²=0.800, p=0.722). Further, the regression analysis indicated that a unit rise in technological innovation would result in 0.756 whereas a unit increase in employee skills would cause 0.352 unit increase in growth of SMEs. The study concluded that technological innovation and employee skills are associated with growth of Interior Design SMEs in Nairobi County. This study recommends that SMEs should enhance their technology to facilitate innovation of new products hence spur their growth. Likewise, SMEs should enhance their employees’ skills to expand their growth.

Key terms: Small Enterprise Growth, Employee Skills, Interior Design SMEs, Technological Innovation

INTRODUCTION

1.1 Background Information

Small and Medium scale Enterprises (SMEs) are pivotal to economic development of states globally. The significantly low unemployment rates, the relatively high incomes and the general acceptable economic growth of most European countries have been to a large part accredited to the presence of SMEs (Woźniak et al., 2019). In the developed world, SMEs are important largely due to the fact that they accept innovations more quickly than big corporations. They are more flexible in their management structure and have creative options to change with the times due to their size than big corporations (Gherghina et al., 2020). Some study approximations are that SMEs account for 35-50% of GDP in many developing nations particularly in Africa (Seseni and Mbohwa, 2019). In fact, Africa’s economic growth is enhanced by SMEs. SMEs offer a lifeline for millions of populations who would otherwise be jobless in countries whose formal sector is constricted and saturated (Moodley, 2021). The SMEs also present a worthwhile potential for exponential growth in most African countries (Chao et al., 2020; Mungal, 2020).

Consequently, in Kenya, the SME sector accounts for an estimated 25% of the national GDP and 93% of labor market (MITED, 2020). Further, over 60% of employees in the SMEs are youth whose age ranges between eighteen and thirty-five years, and a significant 50% being of the female gender (Omondi, 2019). The baseline survey on Small & Medium Enterprises (1993) showed that there were roughly 910,000 SMEs giving jobs to about two million individuals. The 2^nd SME survey (1995) showed a diminishing scope of the SME sector at 708,000 businesses giving jobs to about 1.2 million people (Daniels et al., 1995). Linked to the other sectors of the economy, the effects of the SME sector increased the Gross Domestic Product (GDP) of the nation from 13.8% in 1993 to above 18% in 1999 (Moyi and Ronge, 2006). At the moment, SMEs employ approximately 14.9 million Kenyans in and contribute about 40% of the GDP (MSMEs, 2023).

Though SMEs has been pivotal in the world economy, particularly in Kenya, SMEs growth has not been without significant hindrances. Starting and maintaining any SME has inherent potential for success or failure considering competitive market trends from big corporations. Some of the factors that influence growth of SMEs include:

1.2 Technological Innovation

It has been noted that technological innovation enhances growth of SMEs which is associated with advanced productivity (Zhou, 2017). Indeed, adopting technological innovation can lead to enhanced product quality, increased market share as well as reduced cost of production (Zhou, 2017). The interior design industry is a creative economy with high demand for innovation to enhance quality and design new products (Braun, 2011; Samuel et al., 2022). Technology involved in interior design sector includes software for developing designs, computer equipment printers for imagery production, among others. The demand for new designs and competition in this sector drives the demand for sophisticated technology and rapid evolution of technology. Besides, the complexity of these technologies makes them costly (Hasti and Kusnia, G. 2019).

It is worth noting that many of the advanced SMEs have also shown creative and deep adoption of technological innovativeness (Nurqamarani et al., 2021). Sun (2021) noted

that interior design SMEs that embraced sustainable designing technology had sustainable innovative interior design capabilities as compared to those that didn’t. It has been noted that embracing technology means interior companies can improve their designs, enhance efficiency and innovate spaces that effortlessly blend aesthetics as well as functionality (Rashdan, 2016; Ching and Binggeli, 2018). Machi and Kyalo (2016) indicated that generally SMEs in Nairobi County that adopted technological innovations recorded increased growth.

Unfortunately, one major issue that has stifled SME growth in Kenya is lack of sustainable technological innovations (Indrawati, 2020). Similar to the many budding economies, there is low science and technology uptake of many SMEs in Kenya resulting in limited growth and industrialisation (Mallinguh et al., 2020). This could be serious and significant for SME growth both in the shorter and longer terms. It would thus be interesting to consider the extent to which technological innovation affects SME sector in the Interior Design Industry in Kenya.

1.3 Employee Skills

Competent technical skills among interior design professionals include architectural, graphic design, decorative arts and textile, furniture and furnishings, finishes and lighting design (Ontita et al., 2019), among others. Besides, the professional should have the skills to utilise computer software to develop the required designs. Thus, a skilled interior design practitioner should be able to apply these skills to come up with creative and attractive products for the market demand (Ontita et al., 2019).

In Kenya the demand for interior design labour is on the rise due to a rapidly expanding real estate sector. Interior designers are engaged in retail, commercial and residential segments as the real estate sector continues to proliferate in Kenya (Mwangalwa, 2015). Indeed, due to the increasing middle class in need of homes in Kenya, it is expected that there will be more demand and opportunities for ID (Mwangalwa, 2015).

Massa and Testa (2004) state that training of employees on emerging skill in SMEs will favour innovations translating to  organization growth. In the past, authors have advocated for realignment of education and curriculum in interior design training institutes. The curriculum is expected to be flexible enough to accommodate training on the technological shifts that are associated with the industry (NCIDQ, 2014; Ontita et al., 2019). It has been highlighted that the interior design in Kenya is unregulated. Thus, there is widespread use of untrained labour working in the interior design industry in Kenya (Joseph, 2019). Employers in the interior design industry have cited lack of competent skills in the labour market (Ntinyari, 2014). Thus there is need for improved curriculum in training of interior design practitioners (Ntinyari, 2014). Notably, there is limited literature on how this paucity of skill affects interior design industry in Kenya.

1.4 SME Growth

Business growth can be defined as the progressive measures or indicators that explain the upward change in the business (Blinova et al., 2022; Chen and Huo, 2022). It includes factors such as profitability, sales, number of employees and the total net assets (Wahyuni et al., 2019; Endri et al., 2020). Turnover is one of the most frequently used measures of growth. Factors such lack of appropriate training and lack of technological innovation are some of the major challenges that lead to failure in growth of most SMEs (Rens et al., 2021; Ismail and Naqshbandi, 2022). The resent study investigated the extent to which these factors would affect r the growth of SME’s in Kenya.

1.5 Statement of the Problem

Past statistics have shown that three out of five SMEs started do not succeed beyond five years (MITED, 2020). About 2.2 million SMEs close within five years with 46% having not made it past the first year of operation (MITED, 2020). This is an indication that SMEs are wrought with significant hindrances such as lack of technological innovations and employee’s competency. Setbacks for technological innovation in interior design industry include scarcity of specialists and technical skills, costly innovation and poor or lack of technologically advanced equipment (Nečadová and Scholleová, 2011), among others. Though it is recognised that interior design SMEs in Kenya have limited technological innovation and competency deficiencies, there is paucity of knowledge on the influence of these variables on SMEs growth, hence the concern of this study.

1.6 Objective

To establish the Interplay between technological innovation and employee skills in accelerating Small and Medium Enterprise growth in the interior design industry in Nairobi County.

1.7 Significance of the Study

The research findings are valuable to those practicing in this sector as it brings to the fore the key factors affecting growth of SMEs so that they can develop appropriate strategies and management practices to overcome the challenges paused by these factors. The findings also inform the Government of Kenya in their policy formulation so as to ensure that the SMEs grow to boost economic development. Further, it is hoped that the findings would contribute to the improvement of the academic knowledge of future scholars and academicians as it acts as empirical literature which can be referenced besides suggesting areas for further research.

1.8 Scope of the Study

The study focused on the determinants of the growth of Small and medium Scale Enterprises in the interior design industry in Nairobi County. It looked specifically at technological innovation, and employee skills. It targeted the 174 Interior design, interior decoration and architectural firms offering interior design services in Nairobi County of Kenya, licensed by Nairobi City County. The study was carried out between 2018 and 2023.

LITERATURE REVIEW

2.1 Theoretical Background

2.1.1 Theory of Planned Behavior (TPB)

This study was primarily anchored on the Theory of Planned Behavior (TPB) as propagated by Ajzen (1991). According to Ajzen (1991) TPB is defined as attitude (that leads to behaviour creation), subjective norms and perceived behavioral control that profile an individual’s behaviors and behavioral intents. TPB basically was extended from the Theory of Reasoned Action (TRA). The TRA expounds on a person or group of individual’s reasons that enable them to finally make a decision that then shaped a behavior or action. The TPB extension of TRA is characterized by addition of perceived behavioral controls to the model (Ajzen, 1991).  Thus, TRA is a model that forecasts behavioral intention, as well as predictions of attitude that eventually contributes to an individual course of action or behavior.

The relevance of TPB and TRA to this study is due to their importance as basis for effective SME growth. These theories somewhat control behavior and largely predict what behavior is expected so as to enhance growth and improve performance of a business. Thus, certain factors like leadership, credit access to improve capital and Employee skills are noted as they form the premises to which the growth processes of any SME are predicated. This theory also lends itself to the arguments herein adduced that growth of SMEs is wanting based largely on the owner’s or employee’s behavior towards development, access to credit and leadership.

2.1.2 Technology Acceptance Model Theory

Davis (1989) advanced and espoused the TAM. The model opines that perceived usefulness (PU) together with perceived ease of use (PEOU) make up the twin most significant aspects that explain individual intentions to adopt and utilize a given technology. Thus, PU is described as the mark to which an individual is convinced that using a precise system will enhance their job output.

However, TAM has been criticized by some notable scholars, the most prominent being Hargis, Michael, John, Wyatt, and Piotrowski (2011) who noted that TAM presupposes that all technological innovation issues can be singularly tied to perceived usefulness and ease of use. He argues that other forces like complexity of the resource itself, training and skills and environment also plays on to the innovation process and these also need to be factored. In this context, lack of resources, training and difficulty in use of new technology led to rejection and resistance to change. Again, if the proposed technology is not profitable in an organization more than other old practices in the organization, the technology would not be accepted (Hargis et al. 2011). However, Technology Acceptance Model (TAM) is related to this research in regard to the influence of technological innovation on SMEs growth in the interior design industry in Nairobi County.

2.2 Empirical Literature Review

2.2.1 Technological Innovation and SME Growth

Nazir and Khan (2022) conducted an empirical study on small scale businesses embracing of information and communication technologies in Pakistan. The study significantly and comprehensively adopted TAM. The study investigated the major factors that affect the reception of ICT within the small businesses. One of the exact objectives rotated around the roles, effects of ICT as well as variables driving the ICT adoption in SMEs. Online survey design was adopted to collect data from 81 respondents and linear regression for data analysis. A qualitative research method was adopted which involved collection and analysis of qualitative narrative data from SMEs managers. The sample included 4 SMEs from manufacturing industry, 3 from tourism and hospitality sector and 3 from ICT sectors. The findings of their study showed that TAM was a significant enhanced reception of technological solution that resulted in massive growth indicators for the SMEs. Further, the study outcomes indicated that employees who like the concept of ‘time savings’ were expected adopt technology at a higher rate. However, the study only looked at ICT technology but not a broad spectrum of technologies that importantly could be used in SMEs for customer interaction, operational development and maintenance as this study will.

Cho et al. (2022) investigated acceptance of digital advertising among SMEs; out-of-home (OOH) advertising firms, in Korea. The study adopted TAM and technology-organization-environment framework. The study employed a sample of 1001 Korean OOH advertising firms from whom it collected data. The study acknowledged that OOH firms were hesitant to adopt digital technology due to the resulting implementation cost increase, limited differentiated technology, and lack of personnel resources. The data was gathered through structured surveys.

In Kenya, Agelyne and Musau (2021) evaluated effects of financial technology and inclusion on SME in Kabati market, Kitui County using a descriptive cross-sectional study design. Primary data were collected using closed and open-ended questionnaires. The authors noted that though there is increase financial technology in Kenya, there is still low uptake of this technology among SMEs in Kenya. Their research was supported by many theories namely TAM, Pecking Order Theory (POT), Theory of Asymmetric Information, and Financial Intermediation Theory. According to the outcome from the study, financial technology significantly affects SMEs financial inclusion. Their research recommended that the government should promote and support FinTech technology like M-pesa services, agency banking and online banking to enhance availability of financial services to SMEs. It should be noted that while this study is useful to show the relevance of fintech to SMEs, it does not consider SME growth and how it is affected by technology; which is a huge gap that the present study filled.

2.2.2 Employee Skills and SME Growth

Horváth and Szabó (2019) conducted a study on factors driving and impeding 4^th industry revolution among SMEs. The study was conducted in Hungary. It employed grounded theory. A qualitative case study design was applied and primary data was collected using semi-structured interviews. The sampling size included leading members including chief executive and chief digital officers of 26 firms in Hungary. The result indicated that one of the leading challenges to implementation of industry 4.0 technologies in SMEs is that they lack skilled workers with the competences required to exploit the proceeds of this revolution. It may also be challenging to retrain employees, because this takes a long time, increasing costs. Therefore, for SMEs, the increasing shortages of skilled labour are critical, because these SMEs largely depend on human capital for day-to-day operations. Thus, to drive adoption of technologies driving the fourth industrial revolution SMEs should develop innovative ways of training to equip employee with competences required to be productive in a rapidly changing 4^th industrial space. Though this study provides insight on the state of employee’s competencies among SMEs, it did not concern itself with impacts of these competencies on growth of SMEs, an intervention provided herein.

The relationship between employee skills and SMEs growth has been scantly investigated in Kenya. Stephen (2022) investigated how knowledge capture and acquisition affects firm performance in Kisumu City County. The author opined that knowledge is amongst the most instrumental strategic assets for ensuring long-term survival and success of an organisation. Moreover, knowledge gives employees skills required for innovation and adoption of new technology. The study targeted 150 SMEs in Kisumu City County from different sectors. The study design employed was descriptive research design and primary data was collected using questionnaires. The study was anchored to resource-based views, knowledge-based and organization learning theories. The study reported that knowledge creation, acquisition, sharing and implementation affects performance SMEs. What the study did concern with is the effects of knowledge on growth of SME, the gap which the present study addresses.

2.3 Conceptual Framework

The conceptual framework links the two variables in a schematic framework. It assumes that the aspects of technological innovation, Employee skills, leadership and capital adequacy have either a positive or negative effect on SME growth depending on how effectively they are used. Figure 2 shows how the variables are linked through conceptual framework.

Figure 1: Conceptual framework

Table 1: Operationalization of Variables

RESEARCH METHODOLOGY

3.1 Research Design

The study applied a descriptive research design. Kothari (2014) states that in a descriptive study, accuracy becomes a key consideration and a research design which minimizes bias and maximizes reliability is regarded as good. Mugenda and Mugenda (2013) asserted that descriptive research design reports on a phenomenon as is so as to help build a profile on it without altering it. Descriptive research design was preferred because the focus of the study was in a single County in Nairobi County (Kombo & Tromp, 2009). Descriptive research design ensures optimal reliability of data collected through elimination of biasness as one can engage research assistants.

The total target population was 174 firms that are licensed by the Nairobi County to offer the services of interior design, interior decoration and architectural services. This study used stratified random sampling technique to categorize the different types of firms in the industry which are interior design firms, interior decoration firms and architectural firms as they show different heterogenous characteristics. Mugenda and Mugenda (2013) recommends that a sample size of 10-30% adequately represents the target population. Thus, from each category, a sample 10% of the firms was selected using simple random sampling to ensure there is minimal opportunity for bias (Table 4.2). After this, questionnaire were administered to the owner-manager, one technical person preferably a supervisor and one other employee in each of the selected firms.

Table 2: Sample Size

3.2 Data Collection

3.2.1 Data Collection Tool

Questionnaires were the main tool for primary data collection. A five-item likert scale questionnaire was used to gather the requisite data from the employees and managers. Questionnaire, is a research tool that combines data over a large sample  and is the most reliable study tool as it allows gathering of data from a wide sample with varying background; the information remains private, saves time and as they are accessible in paper format there is no occasion for bias (Kombo & Tromp, 2009).

A pilot study was done to establish reliability and validity of the research instruments. It is recommended that the participants of the pilot study should be similar as possible to the target population and the sample size should range between 20-50 respondents (Van Teijlingen and Hundley, 2002; Sage, 2023). The piloting was conducted by randomly selecting 10 interior design firms in the study area. Once the piloting was complete, the study was reviewed and necessary amendments were done.

The effectiveness of the instrument to capture the data regarding the variables under study was evaluated via content validity. Jankowicz (2005) posits that content validity signifies the extent to which a quantity characterizes all variables of a given social trend. The questionnaire was investigated for relevance, accuracy, completeness and consistency. The recommendation and amendments suggested were incorporated. The Cronbach’s coefficient alpha was utilized to establish reliability of research instrument. Orodho (2003) categorized an alpha value greater or equal to 0.7 is a reliable measure of consistency.

3.2.2 Data Collection Procedure

The researcher personally visited their offices and administered the questionnaires. The collected data was scrutinized and analyzed to determine their trustworthiness.

3.3 Data Analysis and Presentation

Quantitative data collected was analyzed by the use of descriptive statistics in the form of percentages and frequencies with the aid of SPSS version 22. After tallying responses and computing percentages of response, results for each variable were presented in tables. Further, inferential statistics using chi square was used to test the association between the dependent and independent variables. Multiple regression analysis was done to determine the extent to which the independent variable influence the dependent variable. The inferential statistics were done at 95% confidence level and significance inferred at p value=0.05.

RESEARCH FINDINGS AND DISCUSSIONS

4.1 Response Rate 

The study targeted to collect data from a sample size of 54 participants from which all questionnaires were filled and retrieved by the researcher recording 100% response rate. This was an appropriate response rate which enabled the research to draw satisfactory conclusions from the study. In fact, it has been documented by Mugenda and Mugenda (2013) that a response rate of above 50% is adequate, 60% is good and 70% excellent to be a representative of the population under study.

4.2 Reliability Test

A pilot study was administered on the sample respondents to determine the reliability of the data capture instruments. Cronbach’s Alpha was analysed as the measure of internal consistency of the data capture construct. It has been established that any score above 0.7 shows acceptable consistency for the questionnaires (Orodho, 2003). The Cronbach Alpha for every objective was determined. The index for capital adequacy (α=0.872) was the highest followed by technological innovation (α=0.816), leadership styles (α=0.786) and lastly employee skills (α=0.756). Thus, the coefficient for the variables were categorised as good: capital adequacy, technological innovation and acceptable: leadership styles and employee skills. Therefore, there was reliable instrument consistency for the objectives of the study since the Cronbach Alpha was above the threshold of 0.7.

4.3 Demographics

The research sought to determine the gender, age and level of education and years of service of the study participants (Table 6). Majority of the participants were male at 68.5 % while female were only 31.5 %. This could have indicated that the workforce in the industry is male dominated. Most of the respondents were in the age bracket of 27-36 years at 50% followed by 19-26 years (31.5%), 37-46 years (16.7%) then 47-56 years at 1.9%. This suggested most of the workforce in the interior design industry were youthful. As established by findings of the study, most of the participants as indicted by 59.3% were diploma holders while bachelor degree holders were 37% and 3.7 % post graduate holders. Thus, the workforce of the interior design industry were educated. Further, the results revealed that most of the respondents as shown by 31.5% had worked at the SMEs for 2-4 years while those who had served for 5-7 years were 24.1%, above 9 years included 18.5%, below 2years were 14.8% while the minority of 11.1% had served for 7-9 years. Thereby, the results showed that most of the workforce in the interior design industry had experience of more than two years.

4.4 SME Growth

The study determined the growth of SMEs within a duration of the last 3 years in regard to sales, profit before tax, net assets and number of employees. As results showed, 27.8% of the respondents reported that the SMEs had over 25 %, 10-24% and 1-9% growth in sales turnover. On the other hand, 16.7% reported that the SMEs got smaller (Table 3). About 27.8% of the respondents indicated that the SMEs had 25%, 10-24% and 1-9% profit before paying taxes while 16.7% of the respondents reported that the SMEs had reduced profits before tax. As the results showed, 50% and 22.2% of the workers indicated that the SMEs had net assets growth of 1-9% and 10-24% respectively whereas 27.8% of the respondents reported that their SMEs showed no growth of the net assets. Further, majority of the respondents at 72.2% reported the SMEs had 1-9% growth in the number of employees but 27.8% of the respondents reported that the workforce of the SMEs had reduced over the duration of 3 years

Table 3: SME Growth

N=Number/frequency

4.5 Effect of technological innovation on the growth of small and medium sized interior design enterprises

The researcher sought to determine the effect of technological innovation on the growth of SMEs in interior design enterprises. As observed, majority of the respondents at 33.3% agreed that their SME had adequate technological innovations to improve their enterprise growth (Table 4). An equal population of 33.3% of the respondents strongly disagreed that their enterprises had sufficient technological innovations to spur growth. About 11.1% strongly agreed, 5.6% were undecided while 16.7% disagreed on the adequacy of technological innovation at their companies. From the findings, most of the respondents at 72.2% strongly agreed while 27.8% agreed that technology to be used at the enterprises should be friendly and easy to use to facilitate acceptability. On the other hand, 83.3% strongly agreed whereas 16.7% agreed that their SMEs choose their technology on the basis of usefulness to the enterprise.

Half of the respondents (50%) strongly agreed while the other 50% agreed that through application of technological innovation their company had introduced new products to the interior design market. Further, 94.4% of the participants strongly agreed followed 5.6% who agreed that their companies had added more features to some of their products through technological innovation. In fact, 94.4% of the respondents strongly agreed and 5.6% agreed that investment in technology would spur their SMEs to achieve higher profits

Table 4: Technological Innovation

N=Number/frequency

Chi square test showed significant association between technological innovation and SME growth. The observed parameters including net assets, profits and sales were significantly associated with technological innovation at p values of 0.004, 0.022 and 0.040, respectively. However, the number of employees was not significantly associated with technological innovation (p=0.722) (Table 5).

Table 5: Chi square Statistics for Technological Innovation

4.6 Effect of employee skills on the growth of small and medium sized interior design enterprises

The study sought to determine the impact of employee skills on growth of small and medium interior design companies (Table 6). The majority of the respondents disagreed (66.7%) with the notion that their companies could not be having proper employees’ skills. On the other hand, 27.5% strongly disagreed while 5.6% were undecided on the level of employee skills in their companies. Additionally, 61.1% disagreed while 38.9% strongly disagreed with the view that there is no adequate qualified workforce to support the SMEs growth strategy (Table 6). The findings of the study showed that 44.4% of the respondents strongly disagreed, an equal percentage disagreed while 11.1% strongly agreed that lack of highly skilled labour affects the firms negatively and hampered growth of the enterprises.

The study results showed that 61.1% of the respondents agreed and 38.9% strongly disagreed with the statement that training and knowledge is a continuous process at the enterprise. Majority of the respondents at 55.6% agreed and 44.4% strongly agreed that improvement of in-service training and skill development would greatly increase growth of the SMEs. Majority of the respondents at 61.1% disagreed with the view that high turnover of staff limits continuous training and skills development which could hamper SME growth. On the other hand, 27.8% of the respondents strongly agreed and 11.1% agreed that high turnover would limit continuous training and skills development hampering SME growth.

Table 6: Employee Skills

N=Number/frequency

As observed, statistical analysis showed that employee skills significantly affected SME growth on the aspects of sales (p=0.029) and profit (p=0.002). Nonetheless, there was no association between employee skills (p=0.427) and net assets (p=0.282) as well number of employees (Table 7).

Table 7: Chi square Statistics for Employees’ Skills

4.7 Regression Analysis

This study determined to what extent the independent variables: technological innovation, and employee skills influences SMEs growth.

4.7.1 Diagnostic Tests for Assumptions of Regression Analysis

For data to qualify for regression analysis it is required to fulfil the assumption of normal distribution, no multi-collinearity and heteroscedasticity. Normality test was assessed using the levene test. The null hypothesis for this test states that the variance is homogeneous. The p value for the test was > 0.05 (Table 8) hence the null hypothesis was not rejected. Thus, the data showed homogeneity of variances

Table 8: Test of Homogeneity of Variances

Multicollinearity was assessed using the variance inflation factors (VIF). Multicollinearity is a term used to describe high correlation among the predictor variables. The VIF values above 10 indicates multicollinearity. Regression analysis requires absence of multicollinearity in the data. In this study the VIF values were < 10 (Table 9) indicating absence of multicollinearity.

Table 9: Test for Multicollinearity

Heteroscedasticity refers to scenario where variance of a given value is unequal. Regression analyses assumes absence of heteroscedasticity. It was tested using the Breusch-Pagan test whose null hypothesis is absence of heteroscedasticity. The test showed a p-value > 0.05 (Table 10) hence, the null hypothesis was not rejected. Hence, the residuals were assumed to be equally distributed.

Table 10: Test for Heteroscedasticity

4.7.2 Model Summary

The model’s goodness of fit was assessed by the coefficient of determination/R-square (R2). The R²= 0.948 (Table 11) showing that the independent variables could be 94.8 % of the total variation in growth of small and medium enterprises in Kenya.

Table 11: Model’s Goodness of Fit

4.8 Discussion

Productivity of a firm is a function of the technological relationship through which production inputs are efficiently converted into the output as goods and services to achieve customer demands (Kiveu et al., 2019; Skare et al., 2023). As observed in this study, and similarly, a study conducted among SMEs in Nairobi County by Mwavali (2021) reported low adoption of new technology such as cloud computing which could enhance information technology proficiency among SMEs. This could be attributed to some technologies being not locally available, unawareness for existence of the technology by the investor and unaffordability of the technology (Mwavali, 2021; Meng et al., 2021). Further, the results of this study agree with Amoah and Jibril (2020) observation that technological innovations pose a great challenge to growth of SMEs in developing countries.

In agreement to the current study, in Trans-Nzoia County 43.5% of the respondents indicated that technological changes affect SMEs profits earning (Mugodo, 2014). In Huruma Division, Nairobi County a population of 37.6% indicated that technological innovation affected growth and development of their SMEs business (Kedogo, 2013). Additionally, in Huruma Division, Nairobi County, 32.7 % of the respondents reported that technology had helped to increase the number of customers, sales, profitability and increased new product levels in their SMEs (Kedogo, 2013). Additionally, in a study conducted in Maseno Sub-County, Kisumu County, respondents reported that technology encourages creativity and innovativeness that could contribute to SMEs overall growth (Boneface, 2017).

Knowledge and skills of the human capital of an organization are the backbone of its performance (Berman et al., 2019). Organizations should ensure investment into human capital so as to have full competitive advantage offered by competent human resource. Further, human capital management should ensure that employees’ skills, knowledge, experience and innovations are all valued. The management should ensure that the human capital is developed, well mentored, coached and motivated to deliver their best performance (Berman et al., 2019). Similar to the current study findings, Omar, 2018 reported that 48% of the respondents at Zenko Kenya Limited agreed that knowledge and training for team building affects performance of SMEs. Further, all the respondents sampled from SMEs in Maseno Sub-County, Kisumu County indicated that training is required to spur SMEs growth (Boneface, 2017). Further, majority (27%) of the respondents in Gikomba Market, Nairobi County, indicated that they did not get training on work skills which negatively implicated their business (Akinyi, 2018).

Human capital is considered the main resource of an organization (Macke and Genari, 2019; Sedyastuti et al., 2021). Skills and knowledge diversity enable an organization to evaluate, identify and develop discoveries necessary for the business prosperity (Jøranli, 2018). Development of exceptional products and services requires combinative diverse skill. Skilled personnel with technical expertise and essential capabilities are likely to improve business products (Ryan et al., 2018). Staff empowerment and support has been shown to positively affect team performance and customer satisfaction hence organization effectiveness. Organizations can develop competitive positions and strategies to exploit employee strengths as well as enhance their knowledge and skills which will widen their domain of new products, services, innovate new markets and colonize emerging markets, improve image and build customer loyalty (Zelek and Ojo, 2017).

4.9 Study Summary

The study findings may be summarised according to research objectives as follows:

Technological Innovation and SME Growth

The present study showed that technology affected growth of interior design industry SMEs in Nairobi County. It was established that the SMEs lack adequate technology to advance product innovations. Further, the findings suggest that the technology used at SMEs should be friendly and easy to use to ensure acceptability and applicability. Lastly, the technology should be useful and relevant to the enterprise. The results also indicated that through application of technology the SMEs could introduce new products with attractive features, which would stimulate the SMEs to achieve higher growth. Besides, the results showed that increased application of technology would result in higher SMEs growth.

Employee Skills and SME Growth

The study further determined the impact of employee skills on growth of the small and medium interior design companies. It was evident from the study findings that employee’s skills affect growth of SMEs. Majority of the SMEs had adequate qualified personnel to provide services required by their customers. However, training is not perpetual at some interior design SMEs in Nairobi County. Besides, increment in employee skills was shown to promote growth of SMEs.

4.10 Conclusions

Insufficient technological innovations are hindering the growth of Interior Design SMEs in Nairobi County. Investing in technology has the potential to stimulate innovation and result in innovative products with unique characteristics and increased sales revenues. The technology should be user friendly, and easy to use. Nairobi County has insufficient skilled workforce in SMEs specializing in interior design. Regrettably, Interior Design SMEs are deficient in providing ongoing training to enhance employees’ skills due to the frequent turnover of employees which disrupts the ongoing training and development of workers’ technological skills.

4.11 Recommendations

The study makes the following recommendations;

SMEs should acquire the relevant technology so as to spur growth. Advanced technology will enable development of new products with customized features as per the client requirements. Further, they should ensure the acquired technology is useful, friendly and easy to operationalize. The SMEs should provide continuous training to improve employee skills. They should engage in continuous training of employees to spur growth and/or pursue retention strategies to reduce staff turnover hence ensure workers skills are maintained.

4.12 Suggestions for further Research

This study was limited to determine the effects of technological innovation and employee skills on the growth of interior design SMEs in Nairobi County. Further studies can determine the effects of these variables on other aspects of SMEs such sustainability and organisation culture.

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