Exploring the Relationship between Innovation and Performance

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Research Proposal Summary: The Relationship between Innovation and Performance in Small and Medium Enterprises (SMEs): A case analysis of KSA (Jeddah) SMEs

My research proposal aims to evaluate the relationship between innovation and performance in Small and Medium enterprises. The study will be carried out with the help of a case analysis of KSA in Jeddah. While small and medium enterprises make up significant portions of the economy of different countries regardless of whether they are already developed or still developing their growth is significantly limited and very few small and medium enterprises actually eventually manage to rise to high levels and status within the business environment of Jeddah.


Ndesaulwa and Kikula (2016) assert that SMEs are important contributors to any country’s economy however, the marginal treatment they receive cause them to face harsh conditions, which cause them to fail and be unable to grow into large corporate entities regardless of their potential and the level of innovation and creativity within this SMEs. Often they are impacted by Macro Economic factors which limit and effect barriers and challenges to their growth leading to the development of mergers or acquisition for them to be able to continue their full operation. This research therefore delves into trying to uncover the relationship between performance and innovation in SMES highlighting the different factors that limit and challenge this relationship. Among the major objectives the study aims to cover include:

An evaluation of the effect of innovation on the performance of SMEs

An evaluation of the extent with which SMEs in KSA invest in innovation,

A comparison between SMEs in KSA which innovate with those which do not

An evaluation of the extent with which investment in innovative strategies is justified

These objectives should be able to break the topic into smaller objectives of study that will be researched to produce a report that is significant in impacting the growth and development of SMEs. Despite tremendous impacts and contribution of the SMEs to the economy including creation of employment, impacting economic growth and alleviating poverty, SMEs are not given much attention or importance due to their small scope of operation. This research enables the evaluation of the relationship between innovation and performance which is likely to shed light in how they operate and thus impact their significance in the economy.

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The primary research study takes up a mixed methodology approach which includes both qualitative and quantitative research methodologies. While the quantitative methodology defines proxies of innovation and performance, the qualitative methodology will involve open ended questions directed towards a sample of SME entrepreneurs in KSA. The findings will also be supported by a content analysis of the existing literature to solidify the primary and secondary findings. A sample of 100 firms will be drawn. Empirical computations will be done for them on the basis of their financial data available. Eventually the research should be able to provide a clear picture of the operations of SMEs in KSA especially with regards to their innovative practice and the consequent performance. Evaluation of this should further emphasize the significance of SMEs in the economy and why they should be nurtured and prioritized to impact a change in the overall economy Saudi Arabia.

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