Effects of Innovation on Business Performance: Empirical Evidence from Manufacturing Firms in Tanzania

Abstract

Regardless of its relevance for business performance, the influence of innovation
on the performance of manufacturing firms in Tanzania is not well documented.
Thus, this study aimed to examine the effects of innovation on business performance
of manufacturing firms in Tanzania. The study used cross-sectional design and
quantitative approach. Copies of a structured questionnaire were administered to
420 participants from 28 manufacturing companies in Dar es Salaam and Coast
Regions. An impressive response rate of 93.1% was achieved. Data were tested for
reliability using Cronbach’s alpha coefficient. Tests for normality, multicollinearity
and autocorrelation were conducted, and the results showed the data were reliable,
normally distributed, free of multicollinearity and autocorrelation problems.
Descriptive and multiple regression statistical techniques were employed. The
results suggested that a significant positive effect existed between performance of
manufacturing firms and product innovation (B=0.705, p=0.001), process
innovation (B=0.640, p=0.000) and marketing innovation (B=.818, p=0.000). The
obvious implication to industry is that innovation is important to business success
of the manufacturing companies, thus the governments should motivate firms to
innovate continuously by giving incentives to invest in R&D. Past studies linking
innovation and performance have focused on financial measures of performance.
The major contribution of the current study is to use non-financial measures of
performance such as business growth and responsiveness to change.