Factors Affecting the Performance of Small and Medium Enterprises in Tanzania: The Case of Urban West Region, Zanzibar

Abstract

Small and medium enterprises (SMEs) are critical for socio-economic development such that no country can fully achieve sustainable growth and development without the active contribution of its SMEs. Accordingly, this study examined the influence managerial expertise, marketing, and technology use on the performance of SMEs in Urban West Region, Zanzibar. The study employed a cross-sectional survey design and data were collected from 378 SME owners and managers and analyzed data via Ordinal Logistic Regression (OLR). The findings reveal that managerial expertise has a significant and positive impact on SME performance with management training and evaluation systems emerging as key contributing factors. In terms of marketing, the study found that strategic allocation of revenue to marketing activities strongly and significantly enhances performance outcomes. Regarding technology use, only investment in ICT infrastructure demonstrated a marginally significant effect on SME performance. The study contributes to the Resource-Based View (RBV) by demonstrating that internal organizational capabilities, particularly managerial expertise, marketing, and technology use, are important strategic resources influencing SME performance. The findings support the RBV assumption that effective utilization of internal resources enhances firm performance and extend the applicability of RBV in the context of SMEs in Zanzibar. The study recommends that SME owners and managers should strengthen managerial competencies through training and effective evaluation systems, allocate sufficient resources to marketing activities, and enhance investment in appropriate technological infrastructure to improve business performance.