The Influence of Innovation on the Growth of Small and Medium Enterprises (SMEs): A Case of Wood and Steel Furniture Manufacturing in Dodoma City, Tanzania

Abstract

This study examines the impact of innovation on the growth of small and medium enterprises (SMEs) in Tanzania, specifically within the wood and steel furniture manufacturing sector in Dodoma City. Utilizing a quantitative research design, the study tested hypotheses concerning the effects of product innovation, process innovation, and management innovation on SME growth. Data were collected from 91 registered manufacturing firms, providing a representative sample of the local SME landscape. The analysis employed descriptive statistics, factor analysis, Analysis of Variance (ANOVA), and both simple and multiple regression analyses. Results demonstrated a positive correlation between innovation and SME growth. Notably, demographic insights revealed that approximately 51.6% of carpentry entrepreneurs had only basic education, which impacted their management innovation capabilities. Additionally, the majority of these businesses were male-owned and classified as small based on employee numbers. These findings highlight important policy implications regarding the relevance of innovation theories and the Resource-Based View (RBV) in the Tanzanian context. The study concludes with recommendations aimed at strengthening the innovation capacities of SMEs to promote sustainable growth and enhance their competitiveness in the market.