The Influence of Product Innovation on the Performance of Small and Medium Manufacturing Enterprises: The Mediating Role of Market Innovation in Temeke

Abstract

The purpose of the study was to assess the influence of product innovation on the performance of small and medium enterprises (SMEs) when mediated by market innovation. This study adopted an explanatory research design to establish the relationship between variables.  This study was conducted in Dar es Salaam, Temeke District in Tanzania from a total of 277 sample respondents. The study employed a causal research design with a quantitative approach. Data was collected through the self-administered questionnaire to SMEs owners and managers. The collected data was analyzed using the Structural Equation Model (SEM) to establish the extent to which product innovation influences SMEs' performance when mediated by market innovation. According to the findings, product innovation had a significant and positive effect on market innovation, and market innovation had a positive and significant effect on SMEs performance. Consequently, this study concludes that product innovation, when mediated by market innovation, significantly improves the performance of SMEs. This study's findings inform the Tanzanian SMEs Policy of 2003, in keeping up with the rate at which innovations are occurring in the SMEs space. The findings are an important input to the process of SMEs Policy 2003 regarding innovation advancement. Moreover, the findings add value to the frontier of SMEs innovation investment for enhanced performance.