Innovativeness Of Small And Medium-Scale Firms In Calabar Metropolis, Cross River State, Nigeria: The Role Of Financing Choices

Abstract

Financing choices of firms are conscious decisions that are made concerning how it finances its activities which can either be beneficial or detrimental to firms’ outcomes. Specifically, this study aimed at finding out the impact of financing choices (internal, external and debt-equity financing) on innovation of firms in Calabar Metropolis, Cross River State, Nigeria using logit regression model. The study used primary survey data collected from Micro Small and Medium Enterprises (MSMEs) in Calabar, Cross River State in a survey conducted between December 2021 and January, 2022. A non-probability sampling technique was adopted in selecting firms included in the study. The survey was conducted face-to-face using a questionnaire and data was collected from 142 MSMEs covering sectors such as trade, manufacturing, services, agriculture, education, and health. However, data from 134 eligible firms with complete information was coded and analysed. The study specified and estimated three equations on the effect of financing choices on innovation. It was discovered that internal and external financing had insignificant effect on product and process innovation, while internal financing had a negative and significant effect on innovation proxied by expenditure on research and development (R&D). The study recommends increased diversified investment portfolio for small and medium-scale enterprises as this has been found to increase the propensity of these firms to innovate especially in research and development.