Effect of Market Innovation on the Performance of Small and Medium Enterprises in Tanzania

Abstract

The study assessed the effect of market innovation on the performance of Small and Medium
Enterprises in Tanzania. The study, informed by the Schumpeterian Theory of Innovation, analysed the
impact of various facets of market innovation, namely digital marketing, packaging, promotion and
advertising, on the performance of SMEs. The study employed a cross-sectional research design as it enables
the collection and analysis of data at a single point in time to determine the statistical relationships between
variables. The study took place in Dar es Salaam, specifically in the Temeke District, and included a sample of
277 owners and managers of SMEs. Data was gathered via a structured questionnaire and examined through
multiple regression analysis to ascertain the degree of influence each independent variable exerted on the
dependent variable. To ensure validity, the study used a standardised and previously validated measurement
tool. Pilot testing and internal consistency checks of the instrument confirmed the required reliability. The
results showed that digital marketing (B=0.238, p=0.000), packaging (B=0.309, p=0.000), promotion (B=0.200,
p=0.000) and advertising (B=0.101, p=0.000) all had a positive and significant effect on the performance of
SMEs. These findings corroborate the Schumpeterian’s view that innovation propels competitive advantage
and economic expansion. The study finds that market innovation improves the performance of SMEs in
Tanzania. The study provided several recommendations