Impact of Innovations on the Performance of Small and Medium Entrepreneurs in Tanzania

Abstract

Innovation is a key driver of economic growth and competitiveness, especially for SMEs in developing countries. However, the impact of different types of innovation on SME performance in Tanzania remains uncertain. Therefore, the purpose of this study was to explore how various forms of innovation affect the overall performance of SMEs in Tanzania. The study used the cross-sectional research design and random sampling to collect primary data from 162 SMEs in Mbeya. Data was analyzed using the Ordered Logistic Model. The results indicate that product innovation significantly boosts sales and customer satisfaction; process innovation enhances return on equity and product quality. On the other hand, marketing innovation drives sales growth and customer satisfaction while organizational innovation improving production quality and return on equity. These findings imply that innovation is crucial for improving SMEs' performance. Therefore, policymakers should create policies that encourage financial institutions and government bodies to offer grants for product innovation and subsidies for technology adoption. Additionally, they should provide advisory services and incentives for organizational restructuring to enhance the performance of SMEs.