Effect of Cluster Dynamics on Small and Medium Enterprises' Performance in Northwest Nigeria: The Mediating Role of Knowledge Spillovers

Abstract

This research examines how inter-firm collaboration (IC) raises the performance of the small and medium-sized enterprise (SME) in clusters by hypothesizing the mediating effects of knowledge spillover (KS). Although the positive relationship between collaboration and performance is widely acknowledged, the actual processes by which collaborative efforts are converted into the inevitable performance results are under-investigated. The data were gathered through a quantitative research design in which 500 SMEs were selected from three cluster areas (Kano, Kaduna and Kebbi). The proposed mediation model was tested using regression analysis in line with the steps as proposed by Baron and Kenny (1986). The findings indicate that there is a strong direct impact of inter-firm co-operation on the SME performance, and the model captures 45.6 percent of the performance variance. More importantly, the addition of knowledge spillover in the model revealed the spillover as an influential and meaningful predictor of performance. Inter-firm collaboration had a significantly smaller effect which implies a partial mediation. The total mediation model has explained 64.2 percent of the variation in SME performance, much better. The results are strong empirical evidence that knowledge spillover is an important intervening factor that conveys the gains of inter-firm partnership to improved performance of SMEs in clusters. The paper concludes that it is not only the managers who ought to invest in the development of
collaborative partnerships, but also develop organizational structures and cultures that actively enable the absorption and use of the resulting knowledge that spills out of these alliances.