EFFECT OF INNOVATION ON THE SUSTAINABILITY OF SMALL AND MEDIUM ENTERPRISES IN THE DIGITAL ERA: EVIDENCE FROM LAGOS STATE, NIGERIA

Abstract

This paper examines the effect of innovation on the sustainability of Small and Medium Enterprises (SMEs) in the digital era, with evidence centred on Lagos State, Nigeria. The study treats product innovation, process innovation, marketing innovation, and organisational innovation as the explanatory dimensions, while SME sustainability is conceptualised as the capacity of an enterprise to remain viable, competitive, adaptive, and resilient over time.. A quantitative cross-sectional survey design is adopted. The study population is 91,097 small and medium enterprises reported for Lagos State in the 2021 MSME Survey, while the Yamane formula produces a minimum sample of approximately 398 enterprises; a target sample of 400 SME owners or managers is retained. Data are to be collected through a structured five-point Likert scale questionnaire and analysed with Partial Least Squares Structural Equation Modelling using SmartPLS. Institutional Theory and Social Exchange Theory provide the principal theoretical lenses. The reviewed evidence generally suggests that innovation can strengthen SME competitiveness, efficiency, market responsiveness, and adaptive capacity, although the size and significance of the effects vary across innovation dimensions and contexts. The paper concludes that a multidimensional treatment of innovation offers a stronger basis for explaining SME sustainability than treating innovation as a single aggregate construct.