Faith Rhita Awuor^1,, S. Makau A. Muathe¹

Small and medium enterprises (SMEs) are considered to be the engines of development in terms of growth, innovation and employment in developing economies. SMEs are a major source of employment and gross domestic product in Kenya, but have been facing long-term performance problems in terms of poor productivity, lack of market penetration and inefficiencies in operations. Disruptive innovation is now seen as a key enabler of strategic renewal and strategic innovation has become a key enabler for improving the competitiveness of SMEs. This study re-explores Disruptive Innovation Theory as a basis for strategic innovation and looks at its relevance to the performance of SMEs in Kenya. The study is based on Disruptive Innovation Theory, Dynamic Capability Theory, and Contingency Theory, thus using the Cross-Sectional Descriptive Research Design. The data collected were from 383 registered SMEs in Nairobi City County using structured questionnaires, the data analyzed were descriptive, and inferential statistics. The results indicate that strategic innovation makes a significant contribution to the performance of SMEs, with process innovation and disruptive innovation as significant factors. The research finds that the disruptive innovation perspective is a valid theory and practice of analyzing performance gaps in Kenyan SMEs.

Disruptive innovation, strategic innovation, SME performance, dynamic capabilities, Kenya