The Impact of Capital Budgeting on the Innovation Capability of Small and Medium Enterprises in Nakawa Division, Kampala Capital City Authority, Uganda

Abstract

The study examined the impact of capital budgeting on the innovation capability of Small and Medium Enterprises in Nakawa Division, Kampala Capital City Authority. The study was premised on the following research objective: to find out the impact of capital budgeting on the innovation capability of SMEs in Nakawa Division. The study adopted a descriptive cross-sectional survey design using both quantitative and qualitative approaches. In this study, data was collected from a sample of 437 respondents. The data was collected using questionnaires and a key informant interview guide. Analysis was done using Pearson correlation coefficients and simple regression analysis. Qualitative analysis was done using thematic analysis. Findings revealed a strong positive impact of capital budgeting on the innovation capability of SMEs in Nakawa Division; the coefficient is 0.911^** and p-value = 0.000. It was concluded that proprietors of SMEs still struggle to remain operating beyond one year and need training in financial management practices to gain the capability to innovate and thus address the challenge of quick collapse. It was recommended that SMEs' owners in Nakawa Division should be well versed and acquainted with capital budgeting tactics to shield their enterprises from financial challenges.