Small and Medium Enterprises (SMEs) in Nigeria encounter challenges including a decline in competitive advantage, diminished profitability, decreased productivity, and a contraction in market share, all of which contribute to their underperformance, potentially stemming from an absence of innovation. A prevailing aversion to innovation, coupled with limited understanding of key stakeholders shaping innovative processes, collectively undermine SME performance. Consequently, SMEs experience outcomes such as lower-than-projected profitability, erosion of competitive edge, reduced market presence, diminished productivity, and difficulties in cost management. Hence, the study examined the effect of entrepreneurial innovation dimensions on the profitability of selected SMEs in Lagos State, Nigeria. The study adopted cross- sectional survey research design. The population comprised of 42,067 owners/managers of SMEs in Lagos State, Nigeria. A sample size of 495 was determined using Cochran’s formula. Simple random sampling technique was employed to select the respondents. A structured and validated questionnaire was adopted for data collection. The reliability test yielded Cronbach’s alpha for the constructs ranging from 0.716 to 0.879. The response rate was 82.3%. The hypothesis was tested using multiple linear regression statistics at 5% level of significance. The findings revealed that entrepreneurial innovation had significant effects on competitive advantage (Adj.R2= 0.64, F (4, 398) = 182.06, p<0.05). The study concluded that entrepreneurial innovation dimensions had significant effect on profitability of selected SMEs in Lagos State, Nigeria. It was recommended that Small and medium-sized enterprises should cultivate a culture of innovation within their organizations. This involves fostering an environment where creativity and new ideas are valued, and employees are empowered to propose and implement innovative solutions to business challenges.
Keywords: Entrepreneurial Innovation, Process Innovation, Product Innovation, Profitability, management innovation, marketing innovation
