Impact of network embeddedness and Innovation Capability on the Innovation performance of SMEs through Innovation Openness

Abstract

Small and medium-sized enterprises (SMEs) are essential for promoting innovation in economies. The process of developing novel concepts, procedures, goods, services, or solutions that significantly improve and add value is known as innovation. The idea of network embeddedness holds that social relationships impact an organization's economic behavior and that businesses can leverage their social networks to support their growth. The majority of empirical research on innovation focuses on high-tech, large-scale businesses in industrialized nations, and Ethiopia, the impact of network embeddedness and innovation capability on innovation performance has not been investigated before. The study aims to examine the impact of network embeddedness and innovation capability on innovation performance and the mediating role of innovation openness of SMEs. The study used an explanatory research methodology and a structured questionnaire to gather primary data from 222 manufacturing small and medium enterprises operating in Mekelle, Tigray, Ethiopia. The data was analyzed using IBM SPSS v20 and AMOS v20 and confirmed factor analysis (CFA) was employed to assess the validity and reliability of the results. The findings of the study revealed that network embeddedness has a significant impact on open innovation and innovation performance of SME firms. Furthermore, product innovation capability has a significant impact on open innovation. Although product innovation capability has an insignificant impact on the innovation performance of SMEs. Additionally, open innovation has a significant indirect effect between network embeddedness, and product capability on the innovation performance of SMEs. The findings of this study provide to maintain innovation performance based on the theoretical concept of social network theory and resource-based view and Firm owners/ managers, and policymakers should continuously enhance their innovation capabilities.