Policy, infrastructure interventions key to unlocking MSMEs innovation

Innovation breeds competitiveness by reducing the internal transaction costs of any business including micro small and medium enterprises (MSMEs).

Specifically, it is the application of advanced marketing and organisational structures and processes in a business.

However, the above convention notwithstanding, the uptake of innovation and hurdles in the commercialisation of MSMEs remain a significant policy constraint.

The journey from idea to market is therefore far from seamless. Information asymmetry, weak industry-academia linkages and lack of innovation infrastructure are among the key barriers.

Historically, the MSMEs are characterised by low productivity and survivalist activities notwithstanding their glaringly enormous potential as key drivers of development. Taking cognizance of this potential, Kenya prioritised the sector as the key driver of development as enshrined in Vision 2030.

Specifically, the aspiration of Kenya is be transformed into a newly-industrialised middle-income country was predicated on the revitalisation of MSMEs. The mismatch between policy and resource allocation—financial and human—has brought about poor implementation of the policies. The problems that inhibit the growth of the MSME sector persist.

A Public Policy Research and Analysis study revealed that firm size, firm age, owner's gender and level of education are positively related to the probability of innovation adoption rate. It is further established that membership to business associations or being in a strategic alliance enables innovation adoption but only 19.4 percent of licensed MSMEs belong to a business of an MSME association.

Promoting innovation will therefore require deliberate targeted efforts to strengthen linkages and collaborations. One such mechanism is through the provision of innovation infrastructure, such as innovation hubs, technology parks and incubators.

A comprehensive coordinated innovation policy framework that will effectively sustain the MSME sector must include innovation infrastructure, technology, industrial parks and incubation hubs.

These policy and infrastructure interventions offer practical ways to unlock the innovation potential of MSEs. A deliberate and well-coordinated, MSME-centric, innovation policy framework is therefore crucial to institutionalise approaches while fostering collaborations and ultimately fast track the journey from idea to market.

The writers are policy analysts at the Kenya Institute for Public Policy Research and Analysis