Impact of Product and Process Innovation Practices on Competitiveness of Manufacturing Enterprises in Ethiopia Mediated by Competitive Advantage

Abstract

In general, innovation is considered a success element behind growth and competitiveness of manufacturing firms. This study investigated the impact of product and process innovation capability practices on competitiveness of manufacturing enterprises in Ethiopia. It also intended to test whether competitive advantage mediated the relationship between product innovation and competitiveness as well as process innovation and competitiveness. Quantitative research approach was used to collect questionnaire based data from 300 randomly selected manufacturing firms in Ethiopia; out of these, 270 were correctly completed and returned. Structural equation modeling with AMOS v23 was used for data analysis. Measurement model’s validation was done using confirmatory factor analysis in which all of the variables were assessed for convergent, composite and discriminant validity tests.  The findings indicated that both product and process innovations had a significant direct effect on manufacturing firm’s competitiveness of manufacturing firms in Ethiopia. Moreover, both product and process innovations had a significant indirect effect on competitiveness through competitive advantage as the mediating variable. Competitive advantage as a mediating variable had a significant mediating role between product innovation and competitiveness, and between process innovation and competitiveness. These findings have substantial implications for manufacturing firms in Ethiopia to gear their energies towards improvement of products offered to market as well as those processes intended to produce quality products which outshines the internal and external competitions in the market. Hence, Ethiopian businesses are recommended to invest more in product and process innovations to build competitive advantage and competitiveness.