The Role of Product Innovation and Entrepreneurial Passion on Performance of Manufacturing Pharmaceutical Companies in Kenya

Abstract

Research on the influence of entrepreneurial passion on production innovation and firm performance based on the contingency theory is rare. This is highly unusual given that the origin of firm-level entrepreneurial behavior demonstrable in decision-making styles, methods, process and practices is normally traced from the upper echelons (the CEO/Management) of the firm. This research aims to investigate the moderating effect of entrepreneurial passion in the connection between product innovation and performance of pharmaceutical manufacturing firms in Kenya. A survey of 150 firm owners/managers from different parts of Kenya was conducted. A pilot study was conducted to verify reliability and validity of the questionnaire through statistical description and analysis. Then exploratory factor analysis and confirmatory factor analysis (CFA) were conducted to test the correlation between variables. Finally, partial least squares structural equation modeling (PLS-SEM) technique was run in R-studio using R packages plspm, and semPLS to verify the correctness of the proposed hypothesis and model. The results show that the designed questionnaire had good reliability [the correction item total correlation coefficients (CITC) of all scales are greater than 0.3, values of Cronbach’s α are higher than 0.6], the validity (all inventory accumulation explanation degree are higher than 50%) and the fitting, normed fit index (NFI) greater than 0.9, goodness of fit (GoF), and Standardized Root Mean Square Residual (SRMR) less than 0.08, dULS and dG< than the 95% bootstrapped quantile (HI 95% of dULS and HI 95% of dG).The results suggest that product innovation has a significant positive effect on performance. The study also suggest that entrepreneurial passion is a significant moderator of the relationship between product innovation and performance. The moderation {R² change of 0.098, [F (1, 113) = 2.576, p < 0.05]}, is such that firms with higher levels of entrepreneurial passion tend to achieve greater performance from implementing product innovation and vice versa.Thismeans pharmaceutical manufacturing firms in Kenya that invest in product innovation, particularly in areas such as new product formulation, materials and design are more likely to experience new levels of high performance in the market place. The study recommends that, the Government of Kenya should establish an industrial innovation hub only for pharmaceutical manufacturing firms. This will promote Kenya as a pharmaceutical innovation hub where affordable medicinal drugs are produced. Nonetheless, this research study was cross-sectional and based only on pharmaceutical industry in Kenya. Future research is expected to be comparative, consider use of longitudinal data and establish optimal points for these constructs.