An Examination of the Relationships between Different Types of Innovation and Firm Performance and the Mediating Effect of Radical and Incremental Innovations on These Relationships

Abstract

The long-term vector, an area of macroeconomics that is known as economic growth, is driven by innovation and entrepreneurship. Entrepreneurial scholars have contended that types of innovation vary and contingent on the object, the sector and intensity. Building on this assertion, this study examined types of innovation that could have significant impact on firm performance, considering the liability of smallness of SMEs in developing economy. Having employed PLS-SEM on data collected from SMEs in Nigeria, the results of the study suggest product innovation, process innovation and administrative innovation are statistically significant and positively related to firm performance. Radical innovation mediates the relationship between process, product, administrative innovation and firm performance. Incremental innovation mediates the relationship between process, product and firm performance. While the study finds no support for the proposition that incremental innovation mediates the relationship between administrative innovation and firm performance.