Product Innovation and SMEs Performance in the Manufacturing Sector of Ghana

Small and Medium Enterprises (SMEs) are the growth engines for economic development of both developed and developing countries in the areas of job creation, contribution to Gross Domestic Product (GDP), poverty alleviation, and innovation of business ideas. As a result of this, several efforts have been made towards the improvement of their performance. Previous studies based in most advanced countries have established that in today’s globalized and competitive environment, companies focusing on innovation achieve not only competitiveness, but are also able to sustain them for a longer period of time for higher performance. The aim of the study is to establish the contribution of product innovation to the performance and growth of SMEs in Ghana. Using firm level data and the structural equation model, product innovation was grouped into three (Development of new product, Introduction of new product and Improvement of existing product), whiles performance indicators were the growth in number of employees and total sales of the firm. The results indicated a positive growth path between all the three variables and the firm’s performance with the introduction of new products having the highest, indicating that, firms can improve their performance by adopting product innovative practices with much concentration on the introduction of new products.