Indirect Effect of Information and Communication Technology on Business Performance in Small and Medium Manufacturing Industries in Tanzania

Abstract

This study investigated the indirect effects of information and communication technology (ICT) on business performance in Tanzania's small and medium manufacturing industries (SMMIs). This study was motivated by the poor research results that show the indirect application of ICT on product innovation and business performance in SMMIs in the country. Thus, the study was carried out to understand the extent to which the application of ICT enhances product innovation in SMMIs. The study was conducted in four regions namely; Dar es Salaam, Mwanza, Arusha, and Morogoro with a sample size of 474 SMMIs. The data were analyzed using IBM Amos version 26 and structural equation modeling (SEM). The analyzed data showed that the relationship between ICT use and product innovation techniques in Tanzanian SMMIs was highly significant. In the same sample size, the intensity and direction of the association between product innovation and business performance were the same. During the discussion of the findings, it became clear that ICT use and product innovation had increased among Tanzanian SMMIs. The results showed that the indirect effect of ICT use on business performance, when mediated by product innovation, was moderately significant for SMMIs in Tanzania once they were linked. These outcomes are comparable to those of companies in Mexico, Spain, and Italy. According to the findings, SMMIs in Tanzania should increase the application of ICT with a product innovation mindset to improve business performance. This strategy would help SMMIs in Tanzania to achieve their organizational objectives.