Trade Openness and Innovative Performance of Small and Medium Scale Enterprises: The Story of Nigeria and Ghana

Abstract

The study compared the influence of trade liberalisation on innovative performance of SMEs in the two largest economies in West Africa – Nigeria and Ghana. This study utilized data from both primary and secondary sources. The six states in Southwest Nigeria, and Ashanti and Greater Accra regions that house more than 50% and 70% of SMEs in Nigeria and Ghana respectively were purposively selected for the study. In order to have a representation of each business line covered in this study, stratified sampling technique was used in selecting SMEs in four major business areas, namely; manufacturing, trade and distribution, service, and agro-allied business. Questionnaire and interview were employed to obtain primary data from the selected SMEs in the study areas. Altogether, 1,247 and 626 SMEs were selected in southwest Nigeria and the two regions in Ghana respectively using simple random sampling technique. Data collected were analyzed using both descriptive and inferential statistics. The results established that there was a significant positive relationship between trade liberalisation and product innovation (r = 0.071; ρ = 0.026), marketing innovation (r = 0.095; ρ = 0.003), and organisational innovation (r = 0.077; ρ = 0.015) in the selected Nigerian SMEs. However, only process innovation (r = 0.220; ρ = 0.000) showed significant association with trade liberalisation in the selected SMEs in Ghana.  The study concluded that trade liberalisation is crucial for the survival and innovative performance of sub Saharan African countries’ SMEs in the face of intense competition and challenges of globalisation and economic liberalisation. Hence, it is important for developing countries particularly Nigeria and Ghana, to step up the contestability of their domestic markets and formulate effective innovation strategies in order to increase the competiveness of their domestic SMEs.

Keywords: Trade Openness, Innovation, Firm performance, Small and Medium Scale Enterprises, Nigeria, Ghana.