International Journal of Innovation and Development

Fiscal Intervention and MSME Growth Performance: The Mediating Role of Business Model Innovation during COVID-19 in Ghana.

Edmund Ayesu

Kumasi Technical University

Bismark Q. Parker

Kumasi Technical University

John Agyei

Kumasi Technical University

Raymond Akantege

Kumasi Technical University

Keywords: fiscal interventions, business model innovation, MSME performance, COVID 19 and structural equation modeling.

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Abstract

This study examines the relationship between fiscal interventions and micro, small, and medium

enterprise (MSME) growth performance in Ghana during COVID-19, with particular emphasis on the

mediating role of business model innovation (BMI). Using cross-sectional data from 305 MSMEs in

Kumasi Metropolis, we employed a three-model structural equation approach to test relationships

among fiscal stimulus, BMI, and enterprise performance. Contrary to theoretical expectations, the

findings revealed a consistent and statistically significant negative relationship between fiscal stimulus

interventions and enterprise performance across all model specifications. No significant mediation

effect was observed through business model innovation pathways, suggesting that fiscal support

mechanisms failed to promote strategic transformations necessary for sustainable competitive

advantage. Interestingly, the study uncovered evidence of performance-driven innovation patterns,

where successful enterprises demonstrated greater propensity for revenue model adaptations,

indicating reactive rather than proactive innovation behavior. These counterintuitive findings

challenge conventional assumptions about fiscal policy effectiveness in emerging economies and

suggest that COVID-19 support mechanisms may have inadvertently created dependency relationships

or misaligned incentives that hindered rather than enhanced enterprise growth. The results further

highlighted the need for capability-centered policy designs that emphasize strategic guidance

and performance-linked incentives over unconditional financial transfers in MSME development

programs.

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Author Biographies

Edmund Ayesu, Kumasi Technical University

Centre for Social Science Research

Bismark Q. Parker, Kumasi Technical University

Centre for Social Science Research

John Agyei, Kumasi Technical University

Centre for Social Science Research

Raymond Akantege, Kumasi Technical University

Centre for Social Science Research