Product Innovation and Sales Performance of Small and Medium Size Enterprises (SMEs) In Cameroon

1. Introduction

High sales are very important not only to individual businesses but to the overall development of an economy. Sales activities are a condition that helps businesses survive and develop (Hai, 2023). In the market mechanism, selling is an art through which businesses generate revenue, create profits, demonstrates the competitiveness of the business in the market and is the basis for assessing the level of organization. To Behrman et al.(1982), gaining a sizable market share, exceeding sales quotas, locating and cultivating key accounts in one's territory, are all examples of the broad and long-term goals that make up the of sales performance. Sales performance is therefore crucial to every Firm's success, especially in competitive markets (Igor, 2023).

As a result of increasing competition due to globalization, controlling costs is the highest priority in many SMEs. Established firms in developed and developing economies have difficulties finding profitability in their existing production assets, mainly due to high labour costs. To Kinkel (2012), seeking more cost-efficient options through relocation of production may compromise quality and this may damage domestic innovation capability. Therefore, cost-efficiency must be balanced with efforts to maintain high sales performance.

Innovation therefore is a key element to maintain the competiveness of companies and encouraging it among firms is a crucial issue for industrialization and governments. According to Nguyen et al. (2023), increased global and regional competitions have led firms to determine to create and sustain competitive edge by engaging in innovation. A fast-changing environment with constant abrupt changes makes it indispensable for firms to build up their capacity to innovate (Nguyen et al. 2023). The innovation capacity of firms is one of the fundamental skills for achieving success in any business because it leads to product and process improvements, makes continuous advances that helps firms to survive, allows firms to grow more quickly and be more efficient.

Given that, SMEs are small business units and lack capabilities in relation to larger well-established organizations in the market place, SMEs are obliged to pay preeminent attention to enhancing their innovation capabilities by developing entrepreneurial knowledge, adopting new technology and enhancing competencies as a coping strategy to defend their market position.

Problem statement

As competition intensifies in both local and international markets, SMEs that fail to innovate find themselves at a disadvantage, leading to decline in sales. This situation not only affects the businesses themselves but also hampers overall economic development in the Country, as SMEs constitute a substantial portion of the economy. Innovation is increasingly recognized as a critical factor for enhancing sales performance in SMEs, yet many Cameroonian SMEs remain hesitant to adopt innovative practices due to perceived risks, high costs, and insufficient knowledge about available technologies. Consequently, the inability to innovate effectively limits their capacity to meet changing customer demands and exploit new market opportunities.

This study particularly seeks to provide a comprehensive analysis of the effect of product innovation on sales performance of SMEs in Cameroon.

2. Literature Review

2.1 Conceptual review

Product innovation is introducing new products or making significant improvements to existing products (Polder et al., 2010). For product innovation to be complete, the product must be either new or significantly upgraded in terms of its features, intended application, components and materials. According to the OECD (2005), product innovation also includes changes in design that result in a significant change in the intended application or features of the product. Products innovation comes in numerous forms. First, the product is new to the customers as seen from their perspective. Second, the product is brand-new to the company from their point of view. Thirdly, bringing product variety to the company's current products is referred to as product modification (Atuahene-Gima, 1996).

Sales performance to Chawla et al. (2011), is effectiveness, referring to the evaluation of objective outcomes such as sales volume, market share, percentage of quota achieved, number of new customers added, and so on. Furthermore, Dean (2015) sees Sales performance as the sum of sales effectiveness and sales efficiency. Sales effectiveness to him is the ability of a company’s sales professionals to “win” at each stage of the customer’s buying process, resulting in the business earning money on favorable terms and in a timely manner.

2.2 Theoretical Review

Various studies examining the relationship between product innovation and sales performance have shown diverse findings, several theories have shown more of positive relationship between the two concepts. This study is backed by the following theories;

The resource-based view (RBV) theory developed by Wernerfelt (1984) suggests that a firm's competitive advantage is derived from its unique and valuable resources, capabilities, and competencies. The resource-based view (RBV) has become one of the most popular and quoted management ideas in history. Its goal is to explain the internal sources of a company's sustained competitive advantage (SCA) or sales performance. Its basic argument is that, in order for a corporation to achieve SCA or sales performance, it must acquire and control valuable, rare, inimitable, and non-substitutable (VRIN) resources and capabilities, as well as have the organization (O) in place to absorb and use them.

Equally, Dynamic Capabilities Theory by David (1997) assumes that, firms operate in environments characterized by fast and unpredictable changes. These changes may arise from technological advancements, shifting consumer preferences, regulatory changes, or competitive pressures. To survive and thrive, organizations must be agile and responsive, continuously adapting their strategies and operations to align with the evolving landscape. The theory also holds that, firms can develop dynamic capabilities through processes of learning, knowledge creation, and innovation. Continuous learning opens up organizations to adapt their strategies based on past experiences and emerging trends. By fostering a culture of knowledge sharing and innovation, firms can enhance their ability to reconfigure resources and respond to market changes effectively.

The open innovation theory by Chesbrough (2003), holds that Innovation can come from both internal and external sources, Collaboration and partnerships with external stakeholders can lead to greater innovation, Intellectual property can be shared and leveraged for mutual benefit, Open innovation can lead to increased competitiveness and profitability. Therefore, according to the theory, businesses should collaborate with external partners, such as customers, suppliers, and universities, to generate new ideas and develop innovative products and services. This theory has been applied on studies on innovation in small and medium-sized enterprises (SMEs) to understand how they can achieve sustainable innovation through open collaboration. In other words, the open innovation theory, confirms that business entities must employ both internal and external sources of innovation as well as both internal and external market channels in order to implement new strategies and advance their growth.

2.3 Empirical Literature

Odunayo and Adeniran (2021), examined the link between product innovation and sales growth using some selected shoes and garment enterprises in Ibadan, Nigeria. Six hundred and fifty seven (657) middle and top level management staff of shoes and garment enterprises was selected through purposive sampling technique. The study made use of primary source of data which was collected from five hundred and thirty nine (539) respondents. The analysis revealed a strong positive cause and effect, and significant link between product innovation and sales growth. The result showed that the link between product innovation and sales growth was evident; hence, the management of shoes and garment enterprises should therefore improve on innovating their product to attract more sales.

Osei et al. (2016) established 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’

Kimathi (2021), assessed the effect of product and service innovation on the performance of Micro, Small and Medium Enterprises (MSMEs) in Kenya. The study was guided by positivism research philosophy. It utilized a descriptive survey design. The study population included 8,526 licensed MSMEs in Tharaka-Nithi County. Quantitative data was analyzed using both the descriptive statistics and inferential statistics. The results of the study ascertained a significant positive effect of product/service innovation on the performance of MSMEs.

Fauziyah & Santi (2021), analyzed product innovation and value co-creation on marketing performance during covid-19 pandemic. SMEs of food and beverage used as a sample. The study used 34 data from MSMEs in the food and beverage sector affected by COVID-19. Partial Least Square (PLS) on Structural Equation Modeling (SEM) was chosen as the research method in this study. The results showed that value co-creation has a significant effect on marketing performance while Product innovation negatively and not significant effects on marketing performance, and value cocreation significantly affect product innovation.

Twaliwi & Isaac (2017) examined the effect of innovation on SMEs performance in Gwagwalada-Abuja. Data was collected from 348 SMEs in five consecutive years (2010 to 2015), and then carried out regression analysis by using Ordinary Least Squares (OLS) Method to estimate the effect. The study reveals that innovation has a positive effect on the performance of SMEs in Gwagwalada-Abuja. It specifically found that the (positive) effects of product innovation, process innovation and marketing innovation are statistically significant

Mohamed et al. (2017) aimed to examine the impact of innovation on the performance and sustainability of Small and Medium Enterprises (SMEs) in Hargeisa, Somaliland. Target population of the study was 6930 SMEs in Hargeisa; a number provided by Hargeisa Local Government, and Somaliland Ministry of Trade and Investment as the two institutions issue business licenses to the small enterprises and medium enterprises respectively. A sample of 378 SMEs was drawn from this population. The study adopted both descriptive and regression analyses to estimate the impact of innovation. Regression results of the study reveal that innovation significantly affects the performance of SMEs in Hargeisa. The study finds that the effects of product innovation, marketing innovation and organizational innovation are statistically significant among these SMEs.

Adhiambo (2014) investigated product innovation and its effects on the financial performance of Kenyan commercial banks. The study used an explanatory research design and a census approach to collect a population sample of 106 senior and branch managers from nine commercial banks. Data was collected using research questionnaires and face-to-face interviews, and secondary data was taken from commercial banks' 2013 audited annual financial statements. To estimate a multiple regression equation, descriptive statistics and the Ordinary Least Squares approach were used. According to the findings, core product innovation, formal product innovation, and augmented product innovation can explain changes in financial performance.

3. Methodology

3.1 Research design

In this study, a quantitative research design was adopted. Quantitative research examines the relationships between and among variables and the numeric description of trends of data so as to provide answers for the research questions and hypotheses. It utilized secondary data from the World Bank 2024 enterprise survey in Cameroon. The enterprise survey aims at revealing factors that shape the business environment of the economy. It examines the accommodating and constraining factors to enterprise growth.

3.2 Data Collection

The data for this study is secondary data; the dataset was gotten from the World Bank 2024 enterprise survey in Cameroon. The enterprise survey aims at revealing factors that shape the business environment of the economy. It examines the accommodating and constraining factors to enterprise growth. The factors are those that contribute to the growth and productivity of the enterprise and also the economy. The enterprise survey covers small, medium and large firms. The survey is administered to representative firms of the non-agricultural formal private economy. It includes the manufacturing sector, service sector, and transport and construction sectors. Public utilities, health care, government services and financial sectors are not included in the sample.

A wide variety of quantitative and qualitative information was collected in Cameroon through face to face interviews with firm managers and owners on diverse topics; infrastructure, trade, finance, regulations, taxes, business licensing, corruption, crime, informality, innovation, labour and perceptions about obstacles to doing business in Cameroon. The enterprise survey was conducted in Cameroon in 2024 in 4 regions namely North, Centre, Littoral and West as part of the enterprise surveys project, an initiative of the world bank. Stratified random sampling was used to select the surveyed businesses. Business owners and managers of 507 SMEs were interviewed (World Bank 2024 enterprise survey in Cameroon).

3.3 Empirical Model

To estimate the influence of the independent variables on the dependent variable (sales performance of SMEs), the study adopted a multiple regression model from Twaliwi & Isaac (2017). Percentage of national sales was used as a proxy for sales performance like in the studies of; Getinet (2007); Baltagi & Griffin, (1995) and Mesekir Kassa (2013).

SP_i= β₀ + β₁Pdinnov_i + β₂R&D_i + β₃TMgender_i + β₄TMex+ + β₅MM_i+ β₆ISS _i + β₇FLS_i + U_i……. (1)

Where:

SP_i = Sales performance of SMEs measured by Log of national sales

Pdinnov_i= Product innovation which is an index variable gotten through MCA analysis involving the following indicators: Expansion of product range, Introduction of new products, imported new product not found in neigbouring markets and Production of more efficient products.

R&D= Research and development excluding marketing research is a binary variable with 1 if the enterprise carried out research and development excluding market research and 0 if otherwise

TMgender: Top managers gender which is a binary variable with 1 if the top manager is a female and 0 if otherwise

TMex: Top manager’s years of experience. It is a continuous variable measured in years from 1 to 52 years

FLS= Firm’s legal status. It is a categorical variable which takes either (1=Yes, 0=No) if the enterprise is or not a; limited liability company, sole proprietorship, partnership and limited partnership

MM= Market of Main product which is a Dummy variable and takes either (1=Yes, 0=No) if the enterprises focus on Local market (community), National market or International market

ISS=Industry sampling sector it is a dummy variable which takes either (1=Yes, 0=No) if the enterprises is or is not in a; manufacturing sector, Retail or others

β₀ is the constant term or the intercept term and it represents the average effect of all the drivers of sustainability of SMEs.

4. Results And Discussion

Source: World bank enterprise survey (2024)

The summary statistics table shows that, product innovation indicators have 103 observations compared to the observation of other variables in the model. This is because the observations are records of opinions of SME who had innovated in their product. The summary of descriptive statistics shows that, Product Range Expansion shows a mean of approximately 0.067, indicating that a small proportion of firms (about 6.7%) have expanded their product range, with a standard deviation of 0.252 suggesting variability in this practice among firms, as the values range from 0 (no expansion) to 1 (full expansion). Introduction of New Products has a mean of 0.116, suggesting that around 11.6% of firms have introduced new products, with a higher standard deviation of 0.322, indicating significant diversity in the extent of new product introductions. Furthermore, the Importation of New Products Not Found in Neighboring Markets has a low mean of 0.049, reflecting that only about 4.9% of firms engage in this activity, with a standard deviation of 0.216, suggesting that while few firms import unique products, there is still some variability.

Improvements in Product Efficiency has a mean of 0.068, indicating that only about 6.8% of firms report making improvements in efficiency, with a standard deviation of 0.252, again showing variability among firms. Looking at product innovation index, it has a mean of 0.640, indicating that about 64% of the firms innovate in at least 1 aspect of product innovation, with a standard deviation of 0.174, suggesting that while many firms are engaged in innovation, there are differences in the levels of innovation among them.

Log National Sales which is the dependent variable capturing product innovation has a mean of approximately 4.470, which indicates relatively high sales levels among the firms, with a standard deviation of 0.272 suggesting that there is moderate variability in sales figures, ranging from a minimum of 0.693 to a maximum of 4.605.

Looking at the control variables in the study, R&D Excluding Market Research has a mean of 0.094, indicating that only about 9.4% of firms invest in R&D excluding market research, with a standard deviation of 0.293, reflecting significant variability in R&D investment. In terms of top manager’s gender and years of experience, we find that, Top Manager being Female has a mean of 0.178 showing that 17.8% of firms have a female top manager, with a standard deviation of 0.382, indicating a notable gender disparity in leadership roles. While Top Manager’s Years of Experience averages 16.45 years, suggesting that managers are generally experienced, with a standard deviation of 8.980 years, indicating variability in experience levels among managers.

Main Market for Product is split between local (45.1%) and national (50.8%) markets, indicating a slight preference for national markets among firms. Regarding Firm’s Legal Status, public limited companies constitute 12%, sole proprietorships 23%, and limited partnerships only 2.7%, reflecting a diverse legal structure among firms. Finally, the Industry Sampling Sector shows that firms are distributed across various industries, with food (16.3%), manufacturing (18.5%), and retail (31.5%) sectors being the most represented, indicating a broad range of industry participation in the sample.

The correlation tables show the correlations among the variables in this study. From the table it is seen that, the product innovation indicators all have weak but positive correlations with log of national sales except the introduction of new products in the market and Expanding product range. product innovation index has a very weak correlation with a value of 0.0485 indicating that when product innovation is implemented national sales may change by a very small proportion. Introduction of new products has a weak negative correlation with national sales indicating that when new products are introduced in the market, national sales instead drop. This outcome can be explained by the fact that, when new products are introduced, it may likely take some time for customers to adapt and start purchasing the product.

R&D excluding market research has a negative and weak correlation with log of national sales indicating that carrying out research and development excluding market research is inversely related to national sales thus necessitating market research in all research and development adventures.

Looking at characteristics of the top manager, we find that, having a female top manager has a weak positive correlation of 0.0140 with national sales indicating that though the correlation is weak, female top managers could greatly be associated with increased national sales. Looking at the experience of top manager, it has a weak negative correlation of -0.0265 with national sales indicating that, increase in years of experience is inversely relationship with national sales in Cameroon. Looking at the market of the product, we find that, it equally has a weak positive correlation with national sales in Cameroon. From the findings, firms that market their products nationally experience increase in sales more than those who focus in their local communities.

Firm legal status equally has a weak correlation with national sales; public limited companies and sole proprietorship firms having a weak positive correlation with national sales while the other legal status all have weak negative correlations with the national sales in Cameroon. Equally, looking at the market structure, they all have a weak correlation with national sales in Cameroon with only retailing firms experiencing a positive correlation while the rest of the firms experience negative correlation with national sales.

Source: computed by Author (2026)

Table 3 shows the VIF test for the 2 regression models. VIF test shows the degree of multicollinearity in the models. As can be seen on the table, the variable with the highest VIF value is “Main Market for product” with National and local community having very high values which are above 10 in model 1and close to 10 in model 2. The other variables have low VIF values all less than 2. Overall, the mean VIF for model 1 is 2.45 and that of model 2 is 2.64. Since the mean VIF value are very low, we can therefore conclude that, the degree of multicollinearity in both models is low thus allowing us to proceed in interpreting the regression analysis.

Source: Authors regression results (2026)

From the regression analysis, Product Range Expansion shows a coefficient of --0.030 in Model 1, with a p-value of 0.789, indicating that it has no statistically significant effect on sales performance. This suggests that expanding the range of products could lead to a drop in total sales by about 3% though the result is insignificant. This result is negative because, after expanding the range, new product in the rage eats into the sales of existing products resulting to a fall in total sales. The variable Importation of New Products Not Found in Neighboring Markets has a coefficient of 0.071 with a p-value of 0.268. Indicating that the importation of unique products can lead to 7% increase in sales however it is statistically insignificant. Suggesting that firms may not benefit substantially from this strategy in terms of sales.

The Introduction of New Product variable shows a negative coefficient of -0.238 with a highly significant p-value of 0.002. This indicates that introducing new products is associated with a 23% decrease in sales performance, suggesting that the challenges or costs associated with launching new products may outweigh the benefits in the short term due to the fact that, when new products are introduced in the market, the effect is not immediately felt since a lot of marketing needs to be done before customers start purchasing them or adopting the them. For Improvements in Products Efficiency, the coefficient is 0.010 with a p-value of 0.846, indicating no significant influence on sales performance. This suggests that efforts to improve product efficiency may not really translate into increased sales within the studied firms.

The Product Innovation Index shows a positive coefficient of 0.255 with a p-value of 0.045, indicating a significant positive effect on sales performance. This implies that a 1-point increase in the overall product innovation index is associated with a 25% increase in national sales performance, holding other factors constant. This suggests that higher levels of product innovation are associated with improved sales outcomes.

The findings showed that, product innovation has a positive significant influence on sales performance of SMEs in Cameroon. This finding demonstrates that, SMEs that want to make in the market need to constantly innovate in their products so as to continue performing well in sales. This finding is consistent with the research conducted by Osei et al. (2016), which emphasizes that SMEs, particularly in the manufacturing sector, that prioritize product innovation experience higher sales growth and improved market positioning. Product innovation is indeed vital for the sales performance of every SME. In line with finding of this study, Odunayo & Adeniran (2021) concluded that, the link between product innovation and sales growth was evident due to the finding of their study which showed that, there is a significant link between product innovation and sales growth.

Furthermore, just like in this study, product innovation has been found by many authors to have significant effects on sales performances and other aspects of performance of many firms Twaliwi & Isaac (2017) found that production innovation is a key indicator of firm’s performance in Gwagwalada. Mohamed et al. (2017) demonstrated that, product innovation des not only influences Firms performance but further contributes to the sustainability of the firm. All these goes to further support the finding of this study which shows product innovation has a significant effect sales performance of SMEs in Cameroon.

5.Conclusion And Policy Recommendations

This study reveals that innovation plays a crucial role in influencing the sales performance of SMEs in Cameroon since product innovation index demonstrates a positive significant influence. Thus, it is imperative for SMEs to strategically invest in innovation so as to confidently navigate the challenges of a competitive economic landscape effectively. Product innovation though very significant should not be done with proper R&D including market research. This would help in shaping the product innovation strategies to be adopted.

The findings of this study have inspired recommendations which if adopted by most SMEs could lead to better sales performance thus sustainability of the SMEs. It is worth mentioning that, innovation can enhance the efficiency of SMEs by optimizing their processes, reducing costs, and improving quality. This can help SMEs to remain competitive in the market and increase their sales performance, which is essential for their long-term profitability.

SMEs in Cameroon should prioritize proper innovations in their products regularly so as to secure their market share and sales performance. The result of this study showed a positive significant influence of product innovations on sales performance of SMEs in Cameroon. Therefore, it is clear that, investing in product innovation would do no harm to the SME especially given the fact that, customers generally get bored consuming same products year in year out. Furthermore, given existing competition in the market where new firms come in with specified new features in their product, SMEs that do not innovate in their product will steadily lose their market share and be forced to leave the market.

Equally, innovating in other aspects should be considered too by Cameroonian SMEs. Though this study focused just on product innovation, investing in other aspects like technological, marketing and organization innovation could positively improve sales performance. So, SMEs in Cameroon should properly implement other forms of innovation since this will help in the SME securing its position or improving its market share.

References

Adhiambo, J. A. (2014). The effects of product innovation on financial performance of commercial banks in Kenya. MSc Project, University of Nairobi

Atuahene-Gima, K. (1996). Market orientation and innovation. Journal of Business Research, 35(2), 93-103.

Behrman, D. N., Unwers, F. S., Perreault, W. D., & Carolma, N. (1982). Measuring the Performance of Industrial Salespersons. Journal of Business Research, 10(3), 355–370.

Chesbrough, H. W. (2003). Open innovation: The new imperative for creating and profiting from technology. Harvard Business Press.

Dean, J., H. (2015). 10 Tips to Improve Your Sales Performance. Retrieved, January 8 2025, fromhttp://www.sellingpower.com/content/article/?a=10089/10-tips-to-improve-your sales performance.

Fauziyah R., & Santi N. (2021), The effect of product innovation, value co-creation on marketing performance of SMEs in covid-19 pandemic era. jurnal sains pemasaran Indonesia, Volume XX, No. 2, September 2021, halaman 110-124

Hai D. M., (2023) Sales Performance assessment: A theoretical overview, Int. j. adv. multidisc. res. stud. 2023; 3(6):1274-128

Igor Y. (2023), Sales performance, sales and customer orientation: a systematic literature review. Russian Journal of Agricultural and Socio-Economic Sciences ISSN 2226-1184 (Online) | Issue 9(141), September 2023

Kimathi D. (2021), The effect of product and service innovation on the performance of micro, small and medium enterprises in Kenya. Journal of Marketing and Communication 4 (1), 1-16, 2021

Kinkel S. (2012) Trends in production relocation and backshoring activities: changing patterns in the course of the global economic crisis. International journal of operations & production management 32(6),696-720,2012

Mohamed Hussein A., bdikarim Adan H., & Muhumed Mohamed M. (2017), The Impact of Innovation on Small and Medium Enterprises Performance: Empirical Evidence from Hargeisa, Somaliland. International Journal of Academic Research in Business and Social Sciences, Vol. 7, No. 8

Nguyen C. Nguyen D. & Nguyen H. (2023) Personality traits and firm innovation performance: the mediation effect of entrepreneurial innovativeness. Journal of entrepreneurship in Emerging Economies, vol.15 No 1 pp.113—132, doi

Odunayo A., O.& Adeniran A., B. (2021), The Link between Product Innovation and Sales Growth: Case Study of Shoes and Garment Enterprises in Ibadan, Nigeria. International Journal of Industrial Engineering 8 (1), 36-42, 2021

OECD/Eurostat. (2005). The Measurement of Scientific and Technological Activities—Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (3rd ed.). OECD Publishing; doi:10.1787/9789264013100-

Osei A., Shao Y., William A. A. & Forkuoh S. K. (2016). Product Innovation and SMEs Performance in the Manufacturing Sector of Ghana. British Journal of Economics, Management & Trade 15(3): 1-14, 2016, Article no.BJEMT.29906

Polder, M., Leeuwen, G. V., Mohnen, P., & Raymond, W. (2010). Product, process and organizational innovation: drivers, complementarity and productivity effects (pp. 1-42). Montreal: CIRANO.

Pisano G.P., & Shih w.c., (2012), production prosperity: why America needs manufacturing renaissance. Harvard Business press 2012

Twaliwi, Z. C. & Isaac, O. M. (2017), “Impact of Innovation on the Performance of Small and Medium Scale Enterprise in Gwagwalada, Abuja”, International Journal of Entrepreneurial Development, Education and Science Research, Vol.4, No.1, Pp.31-45.

Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5: 171-180.