The effects of product innovation on the performance of small and medium-sized enterprises in Tanzania

Abstract

The main purpose of study was to examine the effect of product innovation practices on the performance of manufacturing SMEs in food processing industry in Mbeya, Tanzania. The study used multi-dimensional analytical approach to examine the effect of product innovation on the performance of SME. With STATA 17 software, the ordered logistic regression analysis was performed using data from a sample of 400 owners and/or managers of manufacturing SMEs in food processing industry. Findings of this study revealed that new product development, product improvement and product line extension has significant and positive impact on SMEs performance in terms of growth of sales (β = 0.628, p <0.05) customer satisfactions (β = 0.549, p <0.05), profitability (β = 0.472, p <0.05), return on equity (β = 0.465, p <0.05), production
quality and delivery speeds (β = 0.479, p <0.05).The findings of the study are relevant for managers and innovation decision-makers when designing innovation strategies to foster the business performance of SMEs. Additionally, the multi-faceted nature of the link between product innovation and business outcomes in SMEs is crucial in securing the desired performance outcomes in a context of limited resources for product innovation.