Dinku, Ashena i Eneyew; Singh, Manji ; Singh, Sandeep
A icle
E ec o human capi al on he pe o mance o small
and medium en e p ises: a media ing ole o inno a ion
p ac ice in E hiopia
Cogen Business & Managemen
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Effec o human capi al on he pe o mance o
small and medium en e p ises: a media ing ole
o inno a ion p ac ice in E hiopia
Ashenafi Eneyew Dinku, Manji Singh & Sandeep Singh
To ci e his a icle: Ashenafi Eneyew Dinku, Manji Singh & Sandeep Singh (2024) Effec
o human capi al on he pe o mance o small and medium en e p ises: a media ing ole
o inno a ion p ac ice in E hiopia, Cogen Business & Managemen , 11:1, 2434729, DOI:
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2024, VoL. 11, no. 1, 2434729
E ec o human capi al on he pe o mance o small and medium
en e p ises: a media ing ole o inno a ion p ac ice in E hiopia
ashena i Eneyew dinku, Manji singh and sandeep singh
school o applied Managemen , Punjabi uni e si y, Pa iala, india
ABSTRACT
in his knowledge economy e a, people-dependen in angible o ganiza ional esou ces,
such as human capi al, d i e sMEs’ inno a ion and pe o mance globally. howe e ,
scan li e a u e examines he nexus be ween human capi al, inno a ion, and sMEs’
pe o mance. hence, he s udy aimed o examine he media ing ole o inno a ion
p ac ice in he nexus be ween human capi al dimensions ( o mal educa ion and
manage ial skill) and he pe o mance o sMEs. a p opo iona e s a i ied wi h a simple
andom sampling echnique was used o ake 425 ep esen a i e owne -manage s o
sMEs in E hiopia. CB-sEM was used o da a analysis. Findings e eal ha owne ’s
manage ial skills and o mal educa ion signi ican ly and posi i ely in luence sME
pe o mance and inno a ion p ac ice. howe e , inno a ion p ac ice pa ially media es
he nexus be ween o mal educa ion, manage ial skills, and sME pe o mance. hence,
he s udy sugges s o policymake s and s akeholde s o play a c i ical ole in aligning
he o mal educa ion sys em and manage ial skill de elopmen o s imula e inno a ion
and imp o e sMEs’ pe o mance. he s udy also sugges s o sMEs o le e age hei
owne s’ human capi al o inno a ion-d i en pe o mance. Fu he mo e, his s udy
con ibu es no el insigh s ha add o he body o knowledge in he ex an
en ep eneu ship ield.
1. In oduc ion
in his dynamic and compe i i e business en i onmen , in angible esou ces, such as human capi al,
would make a di e ence in ad ancing a compe i i e ad an age, os e ing inno a ion, and alue c ea ion
o bols e he pe o mance o sMEs (Kasumawijaya & as u i, 2023; as u i e al., 2021; dogbe e al., 2021).
as he economic pa adigm has shi ed om an indus ial e olu ion amewo k o a knowledge-based
economy since he 20 h cen u y, o ganiza ions demand adequa e human capi al o suppo hei pe o -
mance (Khan & Quaddus, 2018). also, he no ion o la ge-scale i ms ha ook ad an age o economies
o scale as he only d i ing o ce o g ow h and de elopmen un il he 1960s has shi ed o a mo e i al
ole o sMEs in he na ional economy wo ldwide (Weldeslassie e al., 2019). as a esul , p ope ly syn-
ch onizing human capi al, inno a ion, and sME pe o mance eme ges as a po en mechanism o os e -
ing na ional economic g ow h and he p ospe i y o indi idual o ganiza ions and business owne s.
howe e , he con ibu ion o human capi al and inno a ion o he pe o mance o small and medium
en e p ises (sMEs) and he na ional economy is o en pe cei ed as low in de eloping coun ies (ussi &
sali u, 2020). Fo ins ance, ussi and sali u (2020) iden i ied ha low le els o educa ion and imp ope
eco d-keeping hinde he pe o mance o 200 sME ope a o s in Ghana, nige ia, and ogo. ahmad and
ahmad (2021) ound ha mo e han 80% o sMEs ailed wi hin h ee yea s o ope a ion due o misman-
agemen , a lack o inno a ion, and a lack o s a egic planning implemen a ion in pakis an. also, in da a
collec ed om 2009 o 2018 in E hiopia on he de e mining ac o s o he sus ainabili y o sMEs, 320 o
49.23% o sMEs we e ound o be e mina ed o ailed en e p ises (ayele & de seh, 2024). Weldeslassie
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT ashena i eneyew Dinku ashene eney[email p o ec ed] Punjabi uni e si y, nH 64, u ban s a e Phase ii, Pa iala, Punjab 147002,
india
h ps://doi.o g/10.1080/23311975.2024.2434729
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
ecei ed 3 Janua y 2024
e ised 12 sep embe
2024
accep ed 15 no embe
2024
KEYWORDS
pe o mance o sMEs;
human capi al; o mal
educa ion; manage ial
skill; inno a ion p ac ice;
CB-sEM; E hiopia
SUBJECTS
En ep eneu ship and
small Business
Managemen ;
Managemen o
echnology & inno a ion;
human esou ce
Managemen
2 a. E. dinKu E aL.
e al. (2019) also iden i ied ha a lack o human capi al, inno a ion, p oduc and ma ke de elopmen ,
go e nmen and public policy coo dina ion ailu e, and inancing sou ces a e he c i ical challenges o
sMEs’ pe o mance in E hiopia. simila ly, poo managemen and a weak ma ke chain caused 213, o
62.1% o sample mic o and small-scale manu ac u ing en e p ises, o ail in E hiopia (abe a e al., 2019).
he abo e e idence e ealed ha low le els o human capi al and inno a ion cause poo pe o mance
o sMEs in de eloping coun ies, including E hiopia. hence, i calls o he a en ion o sME owne s, pol-
icymake s, esea che s, and s akeholde s o alle ia e he p oblem, pa icula ly in a de eloping coun y
con ex .
Mo eo e , i is concep ualized ha he pe o mance o sMEs is signi ican ly enhanced by he in e play
in luence be ween sMEs’ inno a ion p ac ices and human capi al. inno a ion p ac ices enhance he com-
pany’s o e ings, p ocedu es, ma ke ing s a egies, and o e all e iciency and help de elop supe io p od-
uc s o hose o compe i o s (dogbe e al., 2021). howe e , inno a ion p ac ices in sMEs a e eme ging
in de eloping coun ies and ha e been de eloped by big companies o p o i in de eloped coun ies
(pachou i & sha ma, 2016). also, s udies on he nexus be ween inno a ion and he pe o mance o sMEs
a e concen a ed in he Wes e n, Middle, and Fa Eas and minimal in a ica (ndesaulwa & Kikula, 2016).
hence, his s udy ills he esea ch gap om he pe spec i e o a de eloping coun y, E hiopia.
in his s udy, human capi al is measu ed by o mal educa ion (FE) and manage ial skill (Ms), which a e
he basics o human capi al and a e impo an o he compe i i eness and pe o mance o sMEs (schul z,
1961). While p e ious s udies examined he ela ionship be ween FE and Ms wi h he pe o mance o
sMEs in isola ion, hese s udies did no conside FE and Ms om he pe spec i e o measu ing human
capi al (appiah e al., 2023; deng & Wang, 2023; ahmad & ahmad, 2021; asah e al., 2015). addi ionally,
p e ious s udies ocused on he aining, educa ional le el, and expe ience dimensions o hC and ha e
o e looked much o he FE and Ms dimensions o hC (da & Mish a, 2019; Muba ik e al., 2020; samagaio
& od igues, 2016).
Mo eo e , he e is a lack o s udy on he media ing ole o inno a ion p ac ice (ip) in he nexus
be ween hC and he pe o mance o sMEs in he ex an li e a u e, excep o a ew ela ed s udies ha
ha e explo ed he media ing ole o inno a ion on he nexus be ween hC dimensions ( aining, expe i-
ence, and knowledge) and he pe o mance o sMEs ( imo hy, 2022; aliyu e al., 2019; p ange & pinho,
2017; Byukusenge & Munene, 2017). hence, s udying FE and Ms as a measu e o hC on he media ing
ole o inno a ion p ac ice in he nexus be ween human capi al and he pe o mance o sMEs is a new
app oach ha ills he esea ch gap and ad ances he knowledge base o he en ep eneu ship li e a u e.
his s udy uses human capi al heo y (hC ) and esou ce-based iew ( B ) as a heo e ical ounda ion
o examine he media ing ole o ip in he nexus be ween human capi al and he pe o mance o sMEs.
B posi s ha a i m’s compe i i e ad an age s ems om i s unique esou ces and capabili ies, includ-
ing human capi al (Ge ha & Feng, 2021; K aaijenb ink, 2011). hence, people-dependen in angible o ga-
niza ional esou ces such as hC c ea e compe i i eness and sus ainabili y ad an ages o e angible
o ganiza ional esou ces such as physical asse s and inancial capi al (hall, 1993). ecen ly, he B has
emphasized he need o inc eased a en ion o hC since hC is c ucial no only o indi idual-le el ou -
comes such as job pe o mance and employee de elopmen bu also o i m-le el ou comes such as
compe i i e ad an age and capabili y de elopmen . Because o his, hC becomes a s a egic issue o
managemen (Cipd echnical epo , 2017). as a esul , i implies ha hC ad ances om he B .
simila ly, hC s a es ha employees, manage s and owne s wi h a highe quali y hC en iched wi h
educa ion and skills con ibu e signi ican ly o he pe o mance o sMEs (We ne el , 1984). Educa ion is
o p o ound impo ance in imp o ing he owne -manage s e iciency and p oduc i i y h ough he incul-
ca ion o knowledge and abili ies ha a e u ilized in he ope a ion o he business, he eby boos ing he
pe o mance o he en e p ises (Musa i & Maingi, 2018). appiah and associa es ound ha o mal ashion
educa ion has a signi ican posi i e e ec on he business pe o mance o Ghanaian small-scale ashion
designe s (appiah e al., 2023). howe e , s udies unde sco ed ha he ela ionship be ween o mal edu-
ca ion and he pe o mance o sMEs needs immense a en ion o c i ically implemen ing educa ional
in e en ions h ough well-a icula ed en ep eneu ship educa ion in o mal educa ional ins i u ions o
en ich s uden s wi h adequa e human capi al in e ms o knowledge, skills, and a i udes, which is an
asse o hei u u e business endea o s (appiah e al., 2023). in his ega d, asgha e al. (2023) ecom-
mended ha educa o s enable g adua es/s uden s o adop he echnology and gene a e new ideas in
CoGEn BusinEss & ManaGEMEn 3
a ious inno a ions o enhance business ac i i ies in a coun y. as a esul , i calls o policy in e en ions
o amend he educa ional p og ams o o mal educa ional ins i u ions o ad ance ainees’/business own-
e s’ human capi al in a ious ealms o knowledge, including en ep eneu ial mindse , ha enable hem
o s a and un hei u u e business endea o s.
his s udy con ibu es signi ican ly o ad ancing exis ing knowledge in he en ep eneu ship li e a u e.
i b oadens he scope o he li e a u e by examining he media ing ole o ip in he nexus be ween FE
and Ms and he pe o mance o sMEs, pa icula ly om a de eloping coun y, E hiopia, whe e he e has
been scan empi ically es ed p io esea ch. i is also essen ial o c ea e oom o he egional sME
o ices, policymake s, and go e nmen o design app op ia e policies, goals, and s a egies o enhance
he sME owne s’ human capi al and he pe o mance o sMEs. Mo eo e , he s udy p o ides lessons o
p omo e en ep eneu ship o echnical educa ion in o mal educa ional ins i u ions so ha po en ial
u u e owne s o sMEs can acqui e he necessa y skills and knowledge o human capi al o s a hei
businesses and each success. Fu he mo e, his s udy insis s ha business owne s o sMEs con inuously
upda e hemsel es by aking imely and needed aining o ill knowledge and skills gaps.
sMEs a e he backbone o he E hiopian economy nex o ag icul u e and a sou ce o employmen
o many young ci izens, pa icula ly in he p i a e sec o (Weldeslassie e al., 2019). hence, E hiopia has
gi en conside able a en ion o os e ing he pe o mance and con ibu ion o sMEs o g oss domes ic
p oduc , employmen , and income gene a ion h ough de eloping suppo i e policies and s a egies.
howe e , hey a e s ill challenged by a lack o access o capi al inancing, low inno a ion and human
capi al capabili ies, and a lack o ma ke linkages o hei p oduc s (ayele & de seh, 2024).
due o he abo e esea ch gaps, his s udy examined he e ec o owne s’ hC on he pe o mance o
sMEs and he media ing ole o ip in he nexus be ween owne s’ hC and he pe o mance o sMEs
engaged in cons uc ion, manu ac u ing, u ban ag icul u e, and se ice sec o s in dessie, Kombolcha,
Kemisse, and Woldia ci ies o he amha a egional s a es o E hiopia.
he es o his s udy is o ganized as ollows. he li e a u e e iew p esen s he heo e ical and
hypo hesis sec ion. nex is he ma e ials and me hods sec ion, ollowed by he da a analysis and esul s
sec ion. discussions, conclusions, limi a ions and implica ions a e discussed in ha o de .
2. Li e a u e e iew
2.1. Theo ies unde lying he s udy
2.1.1. Resou ce based iew (RBV)
he B s a es ha businesses can ypically build a long- e m compe i i e ad an age when a i m can
gain a compe i i e edge in i s indus y by ha ing esou ces wi h unique a ibu es like a e, inimi able,
aluable, and non-subs i u able. i , in u n, leads o a sus ained pe o mance ha signi ican ly aids in he
expansion and de elopmen o he business as a whole (Ba ney, 1991). hence, when sMEs a e suppo ed
by unique esou ces, such as human capi al de eloped as a esul o o mal educa ion and manage ial
skill de elopmen , hey will ha e mo e inno a i e capabili ies han o he s who do no apply such unique
esou ces in hei endea o s, consequen ly imp o ing hei pe o mance.
F om he B pe spec i e, We ne el (1984) conside s manage ial skills o be he ounda ion o a
i m’s supe io pe o mance and compe i i e ad an age. sMEs wi h be e expe ise can iden i y ma ke
changes as e and ecognize luc a i e p ospec s be o e hei i als do (pi elis, 2009). he human capi al
o he owne s, which can be exp essed in e ms o manage s and o he employees’ ela ionships, ain-
ing, expe ience, and ideas a e necessa y o enhancing inno a ion and pe o mance o sMEs (dogbe
e al., 2021).
2.1.2. Human capi al heo y (HCT)
he human capi al heo y s a es ha he human accumula ed knowledge acqui ed ia o mal educa ion,
aining, and wo k- ela ed expe iences has le e aged he pe o mance o sMEs (Gimeno e al., 1997).
B ude l and colleagues we e he i s schola s o apply human capi al heo y o he en ep eneu ial se -
ing (B ude l e al., 1992), emphasizing ha hC is a decisi e ac o in enhancing he capabili ies o busi-
ness owne s. Be o e B ude l and associa es used he human capi al heo y in he en ep eneu ial se ing,
4 a. E. dinKu E aL.
hC was pe cei ed o enhance employees’ capabili ies in an o ganiza ion’s human esou ce managemen
se ing (schul z, 1961). hence, he in es men s made o imp o e he knowledge and skills o
owne -manage s will b ing mul i- old e u ns o he sMEs’ pe o mance (Gyasi e al., 2020).
2.2. Human capi al and he pe o mance o SMEs
human capi al (hC) e e s o he collec ion o economically p oduc i e human capabili ies, including
knowledge, heal h, skills, and o he desi able a ibu es ha con ibu e o success ul endea o s acqui ed
h ough gene al educa ion and specialized skills. skills a e a subse o human capi al ailo ed o speci ic
asks, jobs, o en e p ises ob ained h ough specialized educa ion o aining (a ican de elopmen
epo , 2011).
acco ding o somko e al. (2023), a comp ehensi e s a egy in ol ing educa ion, heal hca e, ins i u-
ionaliza ion, and in es men s in knowledge and skills is necessa y o human esou ce de elopmen .
Educa ion and p o essional aining a e one app oach o imp o ing knowledge and skills and, conse-
quen ly, human capi al (abdullaye , 2023). heal h ca e also has a c ucial ole in ex ending li e expec-
ancy, dec easing illness and mo ali y a es, and os e ing human capi al ad ancemen (somko e al.,
2023). human esou ces de elopmen in businesses is also signi ican ly in luenced by p o essional de el-
opmen , inno a ion, and in es men s in human esou ces (Zhu a le e al., 2018).
Mul iple s udies ha e unde sco ed he pi o al ole o human esou ces in MsMEs. he compe ence,
leade ship abili ies, expe ise, and knowledge o human esou ces ha e been shown o impac he pe -
o mance o MsMEs signi ican ly (Mus ha a e al., 2024). hei in luence on inno a ion and pe o mance
makes human esou ces a c i ical ac o in he success o MsMEs (hamsani e al., 2022). a s udy by Chika
and Chike (2021) on 270 MsMEs’ employees in anamb a u he suppo s his, demons a ing ha de el-
oping human capi al h ough employee aining can enhance MsMEs pe o mance.
he and Es ébanez (2023) conduc ed esea ch on a sample o 846 Chinese sMEs om a ious indus-
ies. hei in es iga ion e ealed ha human capi al, pa icula ly h ough highly skilled s a , signi ican ly
enhances he pe o mance o sMEs. simila ly, abdullaye (2023) no ed ha a manage ’s cogni i e com-
pe ence has a subs an ial in luence on o ganiza ional pe o mance. his unde sco es he c ucial ole o
human capi al in os e ing economic de elopmen in he ace o in ense global compe i ion (he &
Es ébanez, 2023).
Mus ha a e al. (2024) conduc ed a li e a u e e iew o in es iga e he cha ac e is ics o human capi al
ha in luence he pe o mance o MsMEs. he hC dimensions e ealed in he s udy, such as educa ion
and aining, employee mo i a ion and engagemen , skills and compe encies, employee heal h and
well-being, inno a ion and c ea i i y, communica ion and coope a ion, digi al skills, and en ep eneu -
ship, we e ound o signi ican ly impac MsME pe o mance.
Fu he mo e, e ec i e manage ial skills a e c i ical o he g ow h and success o MsMEs (ng’o a e al.,
2022). Financial managemen , ma ke ing, human ela ions, and en ep eneu ial skills a e c i ical o e ec-
i e business ope a ions (Macedo e al., 2020). howe e , many MsME owne s and manage s lack hese
skills, pa icula ly in inancial managemen , ma ke ing, and en ep eneu ial abili ies (nambi a &
namene, 2020).
2.3. Human capi al dimensions
as hC is a complica ed, mul idimensional phenomenon wi h many in angible dimensions, i is challeng-
ing o measu e p ecisely by one a iable, a collec ion o i ems, o hei combined sum (Khan & Quaddus,
2018). as a esul o hese in angible a ibu es o hC, a common measu emen model has ye o be
de eloped in he li e a u e so a o measu e owne s’ hC in sMEs. hence, schola s in he ield ha e used
di e en measu emen s o hC. Fo ins ance, Muba ik e al. (2020) ha e used expe ience, skills, educa ion,
abili ies, and aining as co e dimensions o human capi al o sMEs. also, da and Mish a (2019) ha e
de eloped knowledge, expe ience, educa ion, and skills as a human capi al measu emen scale o sMEs.
Mo eo e , samagaio and od igues (2016) conside ed educa ion, expe ience, p o essional p o iciency,
p oac i i y, and pe sonali y as human capi al a ibu es.
CoGEn BusinEss & ManaGEMEn 5
Empi ical s udies on he nexus be ween hC and he pe o mance o sMEs showed ha o mal edu-
ca ion and manage ial skills as he componen s o human capi al ha e ye o be s udied well by p e i-
ous esea che s in sMEs in he en ep eneu ship ield (hani, 2021; Bel amino e al., 2020; popescu
e al., 2020).
2.4. Hypo hesis de elopmen
2.4.1. Fo mal educa ion and he pe o mance o SMEs
Fo mal educa ion is a s uc u ed sys em ha impa s knowledge o he lea ne s in educa ional ins i u-
ions, ei he in pe son o h ough e-lea ning pla o ms. Lea ning o educa ion leads o acqui ing knowl-
edge, conside ed a s a egic asse ha makes a di e ence in sMEs’ pe o mance and compe i i e
ad an age by os e ing inno a ion, adap a ion o ma ke changes, and esilience in he ace o chal-
lenges ( ian e al., 2021). in connec ion, pa k and Choi ound ha o mal and in o mal lea ning posi i ely
in luences sou h Ko ean sME pe o mance (pa k & Choi, 2016). also, deng and Wang (2023) asse ed ha
o mal educa ion is a de e mining ac o o s uden s o make success ul en ep eneu ial decisions in he
global inno a ion and eme ging echnology ma ke . Mo eo e , adequa e human capi al educa ion and
aining con ibu e o sMEs’ high pe o mance (saah, 2022).
Mo eo e , he lea ning sys em ha leans owa d upli ing he pe o mance o sMEs needs o be pu
in place depending on he knowledge gap o he owne -manage s in he gi en con ex because
well-educa ed and skilled owne -manage s can gi e sMEs a compe i i e ad an age in oday’s
knowledge-d i en economy (deba lie e al., 2022). also, unde s anding he e ec o o mal educa ion
on sMEs’ pe o mance can aid policymake s in o mula ing educa ion and en ep eneu ship policies,
enabling ailo ed aining and p og ams o employees and owne s (pham e al., 2023). Fu he mo e, he
ela ionship be ween FE and he pe o mance o sMEs needs o be s udied well in he ield. hence,
based on he p eceding discussions, he s udy posi s he hypo hesis ha ;
hypo hesis 1: Fo mal educa ion has a posi i e signi ican e ec on he pe o mance o sMEs
2.4.2. Manage ial skill and he pe o mance o SMEs
Manage ial skills a e he o ganiza ional esou ces necessa y o add ess impending challenges, di ec he
i m’s ope a ions h ough he de elopmen o o ganiza ional planning, and deal wi h impending chal-
lenges (asgha e al., 2023). Manage ial skills help o make in o med decisions, which con ibu es o
e ec i e managemen in oday’s compe i i e business landscape, gi ing sMEs a compe i i e ad an age
and signi ican ly con ibu ing o sMEs’ pe o mance (sawaean & ali, 2020). in connec ion o his, he
s udy done by ahmad and ahmad e ealed ha manage ial skills signi ican ly and posi i ely a ec he
pe o mance o sMEs in punjab, pakis an (ahmad & ahmad, 2021). also, manage ial skills, as measu ed
by e ec i e inancial managemen , good in e pe sonal skills, enan moni o ing skills, good ma ke ing
skills, echnologically e sa ile skills, p oblem-sol ing skills, and ne wo k capabili y skills, had a signi ican
posi i e e ec on he pe o mance o small, medium, and la ge-scale ag ibusiness incuba o s in india
(Bose e al., 2017).
in a nu shell, examining he nexus be ween manage ial skills and sME pe o mance signi ies he
impo ance o leade ship, communica ion, and in e pe sonal skills in os e ing a posi i e wo k en i on-
men , he eby enhancing he pe o mance o sMEs (daudu e al., 2015). Fu he mo e, manage ial skills
a e one o he building blocks o human capi al. howe e , hey ha e ye o be s udied well enough o
ad ance human capi al in he li e a u e. hence, based on he p eceding discussions, i is p oposed ha ;
hypo hesis 2: Manage ial skill has a signi ican posi i e ela ionship wi h he pe o mance o sMEs
2.4.3. The media ing ole o inno a ion p ac ice
F om he heo e ical pe spec i es o B and hC , i is posi ed ha inno a ion plays a c ucial media ing
ole in he ela ionship be ween human capi al and he pe o mance o sMEs. acco ding o B , unique
o ganiza ional esou ces enhance he inno a i e compe i i eness o sMEs, he eby con ibu ing o hei
6 a. E. dinKu E aL.
highe pe o mance (Ba ney, 1991). i is a gued ha con inuous manage ial skills de elopmen s imula es
he gene a ion and adop ion o inno a ions ha enhance sME pe o mance (We ne el , 1984). simila ly,
hC a gues ha educa ional in es men s os e he g ow h o human capi al wi h echnical skills and
cogni i e capabili ies, enabling sMEs o mo e eadily adop and implemen inno a i e p ac ices, he eby
enhancing o ganiza ional pe o mance (sho , 2019).
simila ly, empi ical s udies e ealed ha inno a ion media es he ela ionship be ween human capi al
and he pe o mance o sMEs. Fo ins ance, ma ke ing inno a ion pa ially media es he ela ionship
be ween op manage s’ human capi al (manage s’ educa ional quali ica ions and yea s o expe ience) and
sME p oduc i i y ( imo hy, 2022). also, o ganiza ional inno a ion has a complemen a y pa ial media ion
e ec in he nexus be ween pe sonal d i e s and sME in e na ional pe o mance (p ange & pinho, 2017).
simila ly, inno a ion ully media es he ela ionship be ween knowledge managemen and he pe o -
mance o sMEs in wanda (Byukusenge & Munene, 2017). aliyu and associa es also iden i ied a signi i-
can media ing ole o inno a ion in he nexus be ween aining and he pe o mance o women in
MsMEs in nige ia (aliyu e al., 2019). howe e , he media ing ole o ip in he nexus be ween FE, Ms,
and he pe o mance o sMEs is ela i ely uncha ed in he ex an en ep eneu ship li e a u e. as i con-
ibu es o ad ancing he body o knowledge o he ex an en ep eneu ship li e a u e and based on he
discussions abo e, he s udy p oposes he ollowing hypo hesis:
hypo hesis 3: inno a ion p ac ice media es he posi i e ela ionship be ween o mal educa ion and he
pe o mance o sMEs
hypo hesis 4: inno a ion p ac ice media es he posi i e ela ionship be ween manage ial skill and he
pe o mance o sMEs
2.5. Concep ual esea ch model
he concep ual esea ch model is de eloped based on he heo e ical and empi ical e iews o he s udy.
hough mul i ace ed (Baylie & singh, 2019), his s udy assesses he pe o mance o sMEs by subjec i ely
e alua ing he owne -manage s pe cep ions o hei company p o i abili y, ma ke sha e, sales olume,
and pe sonal weal h (Zulki li, 2014). Figu e 1 shows he concep ual esea ch model ha shows he nexus
be ween human capi al dimensions, inno a ion p ac ice, and sMEs’ pe o mance.
3. Ma e ials and me hods
3.1. Sampling p ocedu e
E hiopia is one o he de eloping coun ies in Eas a ica, domina ed by a young popula ion, and i s
economy mainly lies in u al ag icul u e and sMEs. he esea che con ac ed he Labo and skills and
indus y and in es men o ices o dessie, Kombolcha, Kemise, and Woldia ci ies o iden i y he ypes
and sizes o sMEs in he amha a egion o E hiopia. as a esul , 857 p i a e o mal sMEs we e iden i ied
om he 2022 annual epo o hese o ices in he espec i e ci ies.
Figu e 1. Concep ual esea ch model.
CoGEn BusinEss & ManaGEMEn 7
a wo-s age sampling echnique was adop ed. in he i s s age, sMEs we e conside ed as he p ima y
sampling uni s. a pilo s udy was conduc ed on 50 andomly selec ed sMEs, making he inal a ge
popula ion 807 sMEs a e excluding 50 pilo sMEs. a o al o 425 sample sMEs we e included in he
s udy by applying he daniel sope sample size de e mina ion o mula wi h an an icipa ed e ec size o
0.2, a desi ed s a is ical powe le el o 0.8, and a p obabili y le el o 0.05 (sope , 2023). a p opo iona e
s a i ied sampling echnique was used o ake ep esen a i e sMEs om he s a a o en e p ises.
Mo eo e , simple andom sampling wi h a lo e y me hod was used o sample sMEs wi hin each en e -
p ise’s ca ego y. in he second s age, sME owne -manage s we e conside ed he seconda y sampling
uni s. a o al o 425 owne -manage s o he al eady iden i ied 425 sMEs in s age one, one owne -manage
om each en e p ise, we e included as esponden s o he s udy pu posi ely because be e in o ma ion
ega ding he s udy’s objec i es is ob ained om hem.
Mo eo e , o add ess po en ial esponse bias in he s udy, he samples we e ensu ed o be andom-
ized, as hey we e andomly d awn om he a ailable lis s o sMEs in he labo and skill, indus y, and
in es men o ices (Malho a e al., 2017). Mo eo e , ha man’s single ac o and common la en ac o
me hods we e used o examine he po en ial esponse bias o esponden s. he esul s e ealed negligi-
ble esponse o common me hod bias in he s udy.
3.2. E hical app o al and in o med consen
in o de o comply wi h he e hical guidelines o conduc ing esea ch in ol ing human pa icipan s, he
p esen s udy was app o ed by he Boa d o pos g adua e s udies and esea ch in he Facul y o Business
s udies o punjabi uni e si y, india, wi h a e e ence numbe o 265/ esea ch. Mo eo e , w i en in o med
consen was ob ained, and he e hical guidelines in esea ch in ol ing human pa icipan s, including
desc ibing he s udy’s pu e academic pu pose, con iden iali y o he pa icipan ’s esponses, and hei
willingness o pa icipa e olun a ily, we e in o med in he in oduc o y pa o he ques ionnai e.
addi ionally, he esea che s a ed he da a collec ion p ocess a e a o mal suppo le e ha clea ly
desc ibes he pu pose o he s udy om Wollo uni e si y, E hiopia, whe e he esea che has been wo k-
ing, was submi ed o and go ull accep ance om he indus y and in es men and Labo and skill
o ices because hese o ices a e esponsible o he es ablishmen and ollow-up o sMEs.
3.3. Scale de elopmen
a s uc u ed ques ionnai e was de eloped comp ising dicho omous, mul iple-choice, and Like scale
i ems. a i e-poin Like scale i ems we e de eloped wi h s ongly disag ee (1), disag ee (2), neu al (3),
ag ee (4), and s ongly ag ee (5). his indica es ha he i ems ha e been de eloped using a quan i a i e
app oach. Fi e i ems we e de eloped o he o mal educa ion cons uc . wo i ems, ‘ he company’s
owne -manage has imp o ed his/he knowledge ia educa ion in o mal educa ional ins i u ion’ and ‘ he
company’s owne -manage has comple ed his/he educa ion in o mal educa ional ins i u ion’, we e
de eloped by he esea che s. he emaining h ee i ems we e aken om (Muba ik e al., 2020) wi h
some modi ica ions in sen ence wo ding. Eigh manage ial skill i ems we e aken om (asah e al., 2015;
agbim, 2013) wi h some modi ica ions in sen ence wo ding. Las ly, se en inno a ion p ac ice and i e
pe o mance o sMEs i ems we e aken om (Baylie & singh, 2019). wen y- i e Like scale i ems we e
de eloped in o al.
3.4. Da a collec ion p ocedu e
a ques ionnai e is he app op ia e da a-collec ing ins umen o explana o y esea ch (saunde s e al.,
2016). due o his, a 5-poin Like scale ques ionnai e was de eloped. a e being de eloped in English,
he ques ionnai e was ansla ed in o amha ic, one o he local languages widely and commonly spoken
in he s udy a ea, o make e e y esponden easily unde s and and espond. he C onbach’s alpha alues
o he pilo es anged be ween 0.718 and 0.816, which is abo e he h eshold alue o 0.7 (hai e al.,
2019), indica ing ha he ques ionnai e is a eliable ins umen o collec da a om he esponden s o
14 a. E. dinKu E aL.
p ac ices, in u n enhancing he pe o mance o sMEs, policymake s should align he o mal educa ion
sys em and manage ial skill de elopmen sys ems ia inculca e s a egies o make u u e owne -manage s
human capi al compe en enough o os e he inno a ion p ac ice o o ganiza ions, pa icula ly sMEs o
imp o e hei pe o mance.
he issues o educa ion, inno a ion, and sME pe o mance a e linked o he Minis y o Educa ion,
Minis y o Labo and skills, in es men Commission, Minis y o indus y, and Minis y o inno a ion and
echnology in he E hiopian con ex . hence, hese ins i u ions and in e es ed s akeholde s should ake
he ini ia i e o play key oles in ans o ming he en ep eneu ship-o ien ed o mal educa ion sys em
and inno a ion cul u e o ans o m he pe o mance o sMEs in E hiopia. Fo ins ance, policymake s
should e ise he educa ional cu icula o educa ional and aining ins i u ions by inco po a ing en ep e-
neu ship and echnical-o ien ed cou ses. also, sMEs should o mula e inno a i e s a egies o boos hei
u u e inno a i eness, in u n, enhance hei pe o mance.
Fu he mo e, inno a ion cul u e is a keen ins umen o os e ing sMEs’ p oduc i i y, g ow h, and
sus ainable pe o mance globally. hence, while inno a ion is backed by adequa e human capi al en iched
wi h quali y o mal educa ion and manage ial skills, he con ibu ion o inno a ion o he compe i i e-
ness and sus ainable pe o mance o sMEs would be highe , pa icula ly in his knowledge economy e a.
so, i is be e o in es in inno a ion and hC no ma e how much i cos s he sMEs and he go e nmen .
in a nu shell, in his knowledge e a, i ms’ in angible esou ces, such as human capi al, moun eno -
mous pe o mance imp o emen s by a mo e han he angible esou ces ha i ms usually own and
use. hence, in es ing in hC de elopmen and inno a ion enhances he knowledge and skills o sMEs’
owne s, which d i es hem o pe o m be e and mo e compe i i ely.
7.Theo e ical con ibu ions and p ac ical implica ions
7.1. Theo e ical con ibu ions
his s udy con ibu es o he li e a u e in a ious ways. Fi s , he s udy indings deduce ha human
capi al dimensions (FE and Ms) posi i ely and signi ican ly in luence he pe o mance o sMEs. so, he
s udy subs an ia es he human capi al heo y, which heo izes ha human capi al has inc edibly le e -
aged o ganiza ions’ pe o mance. second, he choice o FE and Ms as dimensions o hC has ye o be
s udied well by p e ious esea che s. so, FE and Ms as measu es o hC a e new and be e ways o
looking a hC dimensions, unlike p e ious esea che s who ocused on educa ional le el, expe ience in
he sec o , and aining as he componen s o human capi al (da & Mish a, 2019; Muba ik e al., 2020).
hus, his s udy u he en iches he dimensions o hC in he en ep eneu ship li e a u e. hi d, his s udy
also suppo s he B in ha while educa ed and skilled owne -manage s un sMEs, he inno a i e
p ac ices o sMEs will be imp o ed, again making sMEs ou pe o m hei i als in p o i abili y, ma ke
sha e, and sales (Ba ney, 1991). Fou h, ip has a media ion e ec on he nexus be ween FE, Ms, and he
pe o mance o sMEs. so, he p esen s udy con ibu es heo e ical suppo o ip’s media ing ole in he
ela ionship be ween FE, Ms, and he pe o mance o sMEs in he ex an en ep eneu ship li e a u e. in
o he wo ds, his s udy p oposed a new model o u u e esea che s in he ield, ocusing on he medi-
a ing ole o ip on he nexus be ween FE, Ms, and he pe o mance o sMEs.
7.2. P ac ical implica ions
Besides i s heo e ical con ibu ions, his s udy o e s p ac ical implica ions ha unde sco e he pi o al
ole o owne -manage s and policymake s in d i ing pe o mance wi hin sMEs in E hiopia:
Fi s , he s udy highligh s how impo an i is o sMEs o in es in hei human capi al and p omo e an inno-
a i e cul u e. his can boos he sus ainabili y and compe i i eness o sMEs by di ec ing s a egic
decision-making and esou ce alloca ion. second, he s udy sugges s ha sME owne -manage s should ake
sho - e m capaci y-building aining and educa ion p og ams. hi d, owne -manage s o sMEs should upda e
hemsel es wi h con empo a y knowledge and manage ial skill gap aining in p og essi e ways ia online
educa ion p og ams and echnology-based aining such as e-comme ce. his will imp o e hei dynamics o
CoGEn BusinEss & ManaGEMEn 15
hinking ou side he box in a ious inno a i e ac i i ies, such as inc emen al and adical inno a ions, which,
in u n, can enhance sMEs’ pe o mance.
Mo eo e , he s udy’s pa ial media ion ela ionship be ween human capi al, inno a ion, and he pe -
o mance o sMEs can o e aluable insigh s o he go e nmen and policymake s o c ea ing and
implemen ing policies ha encou age en ep eneu ship, enhance wo k o ce compe encies, and c ea e
inno a ion ecosys ems ha suppo sME g ow h. Go e nmen s and policymake s, o ins ance, c ea e
policies o in es ing in human capi al de elopmen h ough en ep eneu ial educa ion, con inuous p o-
essional de elopmen , and oca ional aining speci ic o sMEs’ needs. policymake s should also encou -
age coope a i e ne wo ks be ween sMEs, la ge en e p ises, academic ins i u ions, and go e nmen al
o ganiza ions o suppo sMEs’ inno a ion and pe o mance. ax elie o hose sMEs ha pa icipa e in
inno a ion- ela ed ac i i ies like esea ch and de elopmen , p oduc de elopmen , and p ocess imp o e-
men s could be used by policymake s o encou age inno a ion. addi ionally, by encou aging a mindse
shi owa d con inuous imp o emen and c ea i i y, go e nmen s should suppo an inno a i e cul u e
wi hin sMEs.
7.3. Limi a ions and u u e implica ions
Based on he limi a ions iden i ied in his s udy, he ollowing implica ions we e o wa ded o u u e
esea che s and policymake s. he da a we e collec ed only om he owne -manage s o sMEs in E hiopia.
he possibili y o ob aining biased in o ma ion on hei companies om he owne -manage s can be
alida ed i employees can also pa icipa e in he s udy. so, u u e esea che s shall include employees
as sou ces o in o ma ion so ha he indings will be mo e plausible. Geog aphically, he s udy is con-
ined o ou ci ies in E hiopia’s amha a egion. he s udy shall ha e mo e impac i i s ex e nal alidi y
o gene alizabili y is sound. so, u u e esea che s shall ex end he geog aphical scope by adding mo e
ci ies om E hiopia.
Mo eo e , any u u e esea che s in e es ed in he s udy shall eplica e he s udy in a di e en con ex
globally. FE and Ms cons uc s we e used as measu es o hC in his s udy. Fu u e esea che s shall en ich
he hC dimensions by adding he a iables ‘a i ude and in o mal educa ion/lea ning’. a i ude is one o
he Kas a ibu es (knowledge, a i ude, and skills) used o measu e he human esou ce compe ency
le el. Like o mal educa ion, in o mal lea ning o educa ion needs o be s udied as one o he dimen-
sions o human capi al (pa k & Choi, 2016). his s udy uses composi e o gene ic inno a ion p ac ice as
a cons uc . Fu u e esea che s shall in es iga e inno a ion by speci ic p oduc , p ocess, ma ke , and
o ganiza ional inno a ion (Kahn, 2018; Gaul , 2018; a alay e al., 2013; Bohosie ici, 2009). hence, u u e
esea che s can ex end he hC-ip-pe o mance esea ch model. his s udy only ook sMEs. as la ge-size
en e p ises a e also impo an o he na ion in a ious aspec s, u u e esea che s shall eplica e he
s udy on la ge-scale en e p ises in E hiopia. he p esen s udy used a c oss-sec ional design. he pe o -
mance ends in sMEs ac oss ex ended pe iods a e i al o policymake s. hence, u u e esea che s shall
use a longi udinal design.
Acknowledgemen s
he esea che s ex end wa m hanks o he employees o Labo and skill, indus y and in es men o ices in dessie,
Kombolcha, Woldia, and Kemissie Ci ies o hei collabo a ion in dis ibu ing and collec ing he ques ionnai e and
o owne s-manage s o sMEs who spa e ime in illing ou he ques ionnai e.
Au ho con ibu ions
ashena i Eneyew dinku con ibu ed in he concep ion and design o he i le, da a collec ion and eeding in so -
wa e, analysis and in e p e a ion o he da a; d a ing o he pape , and ead and app o ed he inal manusc ip o
be published. p o esso Manji singh con ibu ed in he concep ion and design o he i le, analysis and in e p e a-
ion o he da a, c i ically e ising he manusc ip , and ead and app o ed he inal manusc ip o be published. d .
sandeep singh con ibu ed in he concep ion and design o he i le, analysis and in e p e a ion o he da a, c i i-
cally e ising he manusc ip , and ead and app o ed he inal manusc ip o be published.
16 a. E. dinKu E aL.
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Abou he au ho s
Ashena i Eneyew Dinku is an assis an p o esso in he depa men o Managemen a Wollo uni e si y, dessie,
E hiopia. he is cu en ly pu suing his phd in uni e si y school o applied Managemen a punjabi uni e si y, pa iala,
india. he comple ed his Ba and MBa deg ees om addis ababa uni e si y, E hiopia. his key esea ch a eas include
co po a e social esponsibili y, human esou ce managemen , leade ship, and en ep eneu ship.
D . Manji Singh is a p o esso a he uni e si y school o applied Managemen , punjabi uni e si y, pa iala, is a sea-
soned academician wi h an illus ious esea ch ca ee . o e nea ly h ee decades, he has con ibu ed ex ensi ely o
Managemen and Comme ce educa ion, publishing 140 schola ly a icles in leading na ional and in e na ional jou -
nals. his esea ch spans co po a e go e nance, inancial well-being, and sus ainabili y, wi h signi ican con ibu ions
o socially esponsible in es ing and inancial inclusion. d . singh’s wo k has been ecognized wi h p es igious
awa ds, has success ully guided mo e han 38 ph.d. schola s and has a ema kable in e na ional engagemen includ-
ing leade ship oles in wanda and pa icipa ion in p og ams by s an o d uni e si y, unEsCo and iiEp unde sco ing
his global esea ch impac . as an ad oca e o in e disciplina y esea ch, d . singh emains commi ed o ad ancing
academic inqui y and os e ing inno a i e solu ions o con empo a y business and economic challenges.
D . Sandeep Singh is ac ing as an assis an p o esso a uni e si y school o applied Managemen , punjabi uni e si y,
pa iala, punjab, india. he is also ac ing as associa e edi o o in e na ional Jou nal o echnology ans e and
Comme cialisa ion. he is quali ied in di e se a eas like LLB, MBa (h ) and ph.d. in Managemen . he has mo e han
en yea s’ expe ience in eaching and esea ch. he is aine o a ious so wa es like spss, aMos, Wa p-pLs,
sma -pls, adanCo and JaMo i.
Da a a ailabili y and ma e ials s a emen
da a a ailable on easonable eques om he co esponding au ho .
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