Industrial ecosystems and innovation

A study of Kenya’s manufacturing sector suggests that industrial innovation there depends more on exogenous factors rather than what happens inside a firm. The findings, published in the International Journal of Business Innovation and Research, show there is a strong relationship between an “innovation ecosystem” and how well companies develop new products, improve their processes, and stay competitive.

An innovation ecosystem is the wider network in which a company operates. It includes government policies, access to finance, access to transport and energy, relationships with suppliers and customers, and links to universities and research institutions. These various elements determine how easily a company might generate new ideas and turn them into commercially viable goods or services. Innovation performance measures the outcomes of all these efforts.

The findings suggest that firms embedded in a strong ecosystem with reliable business services, effective trade support, and opportunities for knowledge sharing perform better in terms of innovation than companies without this external support. Fundamentally, companies in this kind of environment can adapt to changing market conditions and sustain growth.

Companies interact continuously with regulators, customers, suppliers, and research bodies, and innovation emerges from these interactions, rather than being due simply to internal research and development. The new perspective offered by this research challenges traditional management approaches and shows that companies ought to prioritise collaboration, learning, and flexibility rather than conventional management controls and hierarchy.

The researchers point out that the implications of their study are particularly acute for Kenya, where manufacturing has struggled to maintain competitiveness. Historically, Kenya has focused on exporting raw or semi-processed materials rather than higher-value finished goods. But this has limited both profitability and job creation, and there has been a decline in growth in manufacturing in recent years. The researchers explain that low levels of innovation may be to blame and suggest that responsibility for improvement does not rest solely with individual companies but with the industrial ecosystems discussed.

Gachanja, I.M. (2026) ‘Nexus between innovation ecosystem and innovation performance’, Int. J. Business Innovation and Research, Vol. 39, No. 9, pp.1–20.