Bank Innovation Capability and Competitive Advantage of Small and Medium Scale Enterprises in Nigeria

Abstract

Small and medium scale enterprises (SMEs) are seen as the engine of most economies of the world. Hence, alarming rate of SMEs' failure in Nigeria, has prompted banks, in response to both regulation and changing market dynamics, to resort to innovating around their structures, systems and processes to design products and processes that could help in alleviating the SMEs failure rate. Therefore, this study investigated the effect of bank innovation capability on the competitive advantage of small and medium enterprises in Nigeria. Cross-sectional survey research design was adopted, 5,292 and 27,000 staff of banks with dedicated SMEs' desks and SMEs' owner managers respectivelywere sampled and data collated. Multiple regression analysis was adopted and the result shows that bank innovation capability had positive significant effect on competitive advantage (Adj R² = 0.127, (F (5,493) = 15.483, p<0.05). It was concluded that bank innovation capability affect the competitive advantage of small and medium enterprisesand it was recommended thatCentral Bank of Nigeria should encourage deposit money banks in Nigeria to embrace innovation capability dimensions which is tailored to customers' needs in dealing with SMEs' industry so as to drive their competitive advantage.