Small and medium enterprise (SME) competitiveness and employment creation: the mediating role of SME growth

Abstract Owing to the growing inability of the state to provide employment for citizens globally, SME growth now appeals to many people as the solution to employment generation and by implication, economic growth and development. Flowing from the capabilities based view (CBV) theory, this study investigated SME competitiveness and employment creation to explain how SME competitiveness can contribute to national income through employment creation using SME growth as a mediator. The design was a cross-sectional survey of 93 respondents from SMEs in Nigeria. The study used a structured questionnaire to collect the research data and used structural equation modelling to analyse the data. The results indicate that product innovation and product differentiation have significant relationships with employment generation owing to their capacity to enhance SME growth. Secondly, SME growth mediates the relationship between SME competitiveness (product differentiation, innovation and imitation) and employment generation. This study differs from previous ones through its use of product line, innovation, differentiation, and imitation in a single framework to operationalise SME competitiveness as well as the mediation of the relationship between SME competitiveness and employment generation with the growth rate of SMEs. In addition, the study makes a theoretical contribution through the use of a firm’s activity based capabilities to demonstrate its competitiveness.