CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Innovation has long been recognised as a central driver of firm competitiveness. Schumpeter (1934) conceptualised innovation broadly, encompassing new products, new methods of production, the opening of new markets, new sources of supply and new forms of industrial organisation, arguing that firms which continuously innovate disrupt existing market structures through a process of creative destruction. Building on this idea, Teece, Pisano and Shuen's (1997) dynamic capabilities theory holds that a firm's ability to integrate, build and reconfigure its internal and external competences in response to a rapidly changing environment is what ultimately sustains competitive advantage, particularly in technology-intensive and capital-intensive industries such as manufacturing.

Nigeria's manufacturing sector operates in a demanding environment shaped by infrastructural deficits, high production costs and volatile market dynamics, conditions that make innovative approaches to production and strategy especially consequential for firm survival and growth. Within this environment, Nigeria's automotive industry has historically depended heavily on imported vehicles, including used vehicles commonly referred to as tokunbo, leaving considerable room for indigenous manufacturing to develop. Innoson Vehicle Manufacturing (IVM), founded in 2007 by Chief Innocent Ifediaso Chukwuma and headquartered in Nnewi, Anambra State, emerged as Nigeria's first major indigenous automaker, producing buses, trucks, pick-ups and passenger cars engineered for local road conditions, and has more recently unveiled the IVM EX02, described as Nigeria's first locally manufactured electric vehicle.

Recent scholarship situates IVM's growth within a broader narrative of African indigenous automotive innovation. Madichie and Nkamnebe (2025), drawing on an in-depth interview with the company's founder, trace IVM's strategic innovation to the local adaptation of imported technology, low-margin high-volume production strategies and close alignment with government industrial policy, while also noting persistent obstacles such as infrastructure gaps, high costs and limited institutional support that constrain the full competitive benefit of this innovation. Comparative evidence reinforces the competitive stakes involved: Nwonu (2026), examining strategic management practices across IVM, Stallion Group, Peugeot Automobile Nigeria and Volkswagen Nigeria, found that strategic management dimensions significantly influenced organisational performance across all four firms, though the magnitude of the effect varied considerably by firm. Elsewhere in Nigeria's manufacturing space, Zhou, Ayegba, Ayegba, Ayegba and Jie (2021) found that dynamic capacities significantly affect the performance of food and beverage enterprises in Lagos, while Keelson, Cúg, Amoah, Petráková, Addo and Jibril (2024) show that process innovation moderates the relationship between market competition and firm performance among SMEs in emerging economies more broadly.

Taken together, this evidence suggests that innovation management is closely bound up with the competitiveness of manufacturing firms generally, and of Nigeria's indigenous automotive sector in particular. Given IVM's position as a pioneering indigenous manufacturer operating against both cheaper imported alternatives and better-resourced multinational assemblers, it is important to understand more precisely how specific dimensions of innovation management shape the company's competitiveness. This is the concern that motivates the present study.

1.2 Statement of the Problem

Innoson Vehicle Manufacturing has achieved notable milestones as Nigeria's pioneering indigenous automaker, including the recent development of the country's first locally manufactured electric vehicle. Yet the company continues to compete in a market shaped by cheaper imported used vehicles, established multinational assemblers such as Peugeot Automobile Nigeria and Volkswagen Nigeria, and structural constraints including infrastructure gaps, high production costs and limited institutional support (Madichie & Nkamnebe, 2025). These conditions raise the concern that innovation efforts at IVM may not be translating as effectively into sustained competitiveness as they could, particularly relative to better-resourced rivals.

A further difficulty is that existing scholarship on IVM has tended to be descriptive or comparative in nature. Madichie and Nkamnebe (2025) offer a largely qualitative, interview-based account of the company's innovation journey, while Nwonu (2026) examines strategic management broadly across four automobile firms without isolating the specific innovation dimensions, such as product, process, organisational or marketing innovation, that most strongly shape competitiveness within IVM itself. Without firm-specific, dimension-level empirical evidence, IVM's management may find it difficult to determine where further investment in innovation would yield the greatest competitive return. It is this gap that the present study seeks to address by empirically examining the relationship between innovation management and business competitiveness at Innoson Vehicle Manufacturing.

1.3 Objectives of the Study

The broad objective of this study is to examine the relationship between innovation management and business competitiveness at Innoson Vehicle Manufacturing. The specific objectives are to:

1. examine the effect of product innovation on business competitiveness at Innoson Vehicle Manufacturing;

2. determine the effect of process innovation on business competitiveness at Innoson Vehicle Manufacturing;

3. assess the effect of organisational innovation on business competitiveness at Innoson Vehicle Manufacturing; and

4. evaluate the effect of marketing innovation on business competitiveness at Innoson Vehicle Manufacturing.

1.4 Research Questions

The study is guided by the following research questions:

1. What effect does product innovation have on business competitiveness at Innoson Vehicle Manufacturing?

2. What effect does process innovation have on business competitiveness at Innoson Vehicle Manufacturing?

3. What effect does organisational innovation have on business competitiveness at Innoson Vehicle Manufacturing?

4. What effect does marketing innovation have on business competitiveness at Innoson Vehicle Manufacturing?

1.5 Research Hypotheses

The following null hypotheses are formulated to guide the study:

Ho1: Product innovation has no significant effect on business competitiveness at Innoson Vehicle Manufacturing.

Ho2: Process innovation has no significant effect on business competitiveness at Innoson Vehicle Manufacturing.

Ho3: Organisational innovation has no significant effect on business competitiveness at Innoson Vehicle Manufacturing.

Ho4: Marketing innovation has no significant effect on business competitiveness at Innoson Vehicle Manufacturing.

1.6 Significance of the Study

Theoretically, the study extends Schumpeterian innovation theory (Schumpeter, 1934) and dynamic capabilities theory (Teece et al., 1997) to Nigeria's indigenous automotive sector, complementing the largely descriptive account of IVM's innovation journey offered by Madichie and Nkamnebe (2025) and the cross-firm strategic management evidence provided by Nwonu (2026) with dimension-specific, firm-focused empirical evidence.

Practically, the findings will assist the management of Innoson Vehicle Manufacturing in identifying which innovation dimensions most strongly influence competitiveness, thereby guiding the allocation of resources toward the most impactful innovation investments. Policymakers responsible for Nigeria's National Automotive Industry Development Plan, other indigenous manufacturers seeking to emulate IVM's model, and investors evaluating the sector may also draw on the findings. The study will further serve as a reference for future researchers examining innovation management and competitiveness in Nigeria's manufacturing and automotive industries.

1.7 Scope of the Study

This study is delimited in content to innovation management, measured through product innovation, process innovation, organisational innovation and marketing innovation, and business competitiveness, measured from the perspective of staff of the case study organisation. Geographically, the study is confined to Innoson Vehicle Manufacturing's operations, drawing respondents from its manufacturing plant and administrative offices in Nnewi, Anambra State. The study is further limited to a defined recent period during which primary data will be collected through the administration of structured questionnaires, and does not extend to a comparative assessment of other automobile firms such as Stallion Group, Peugeot Automobile Nigeria or Volkswagen Nigeria, which are referenced only for background context.

1.8 Definition of Terms

Innovation Management: the systematic process by which an organisation plans, implements and controls the generation and application of new ideas, products, processes or practices to create value (Schumpeter, 1934).

Business Competitiveness: a firm's ability to sustain or improve its market position relative to rivals through superior products, pricing, efficiency or customer value.

Product Innovation: the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses.

Process Innovation: the implementation of a new or significantly improved production or delivery method within an organisation.

Organisational Innovation: the implementation of a new organisational method in a firm's business practices, workplace organisation or external relations.

Marketing Innovation: the implementation of a new marketing method involving significant changes in product design, packaging, placement, promotion or pricing.

Dynamic Capabilities: a firm's ability to integrate, build and reconfigure internal and external competences to address rapidly changing environments (Teece, Pisano & Shuen, 1997).

Indigenous Manufacturer: a locally owned and locally established production firm, as distinct from a foreign-owned or multinational assembler operating within the same national market.

References

Keelson, S. A., Cúg, J., Amoah, J., Petráková, Z., Addo, J. O., & Jibril, A. B. (2024). The influence of market competition on SMEs' performance in emerging economies: Does process innovation moderate the relationship? Economies, 12(11), 282. https://doi.org/10.3390/economies12110282

Madichie, N. O., & Nkamnebe, A. D. (2025). Africa's indigenous automotive innovation: A focus on Innoson Vehicle Manufacturing and the future of electric vehicle marketing. Journal of Sustainable Marketing. https://doi.org/10.51300/jsm-2025-151

Nwonu, C. O. (2026). Strategic management and organisational performance in select automobile industries in Nigeria. International Journal of Sub-Saharan African Research, 4(1), 375–393.

Schumpeter, J. A. (1934). The theory of economic development. Harvard University Press.

Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533.

Zhou, L. L., Ayegba, J. O., Ayegba, E. O., Ayegba, P. M., & Jie, Z. X. (2021). Impact of dynamic capacities on the performance of food and beverage enterprises in Lagos, Nigeria. Journal of Innovation and Entrepreneurship, 10(1), 50. https://doi.org/10.1186/s13731-021-00169-1