What drives productivity in Tanzanian manufacturing firms: technology or business environment?

Abstract

Using cross-sectional firm-level data, this paper examines the determinants of productivity among manufacturing firms in Tanzania. In particular, it seeks to evaluate the relative importance of technological advances and the business environment in which firms operate in affecting productivity. Of the technological variables, R&D as well as product and process innovation, licensing of technology, and training of employees fail to have any impact; only foreign ownership, ISO certification and higher education of the management appear to affect productivity. Some important influences from the broader business environment, however, appear to affect productivity and are robust to different specifications of the model. Credit constraints, administrative regulatory burdens and a lack of business support services depress productivity; membership of a business association is associated with higher productivity.productivity, technology, R&D, innovation, business environment, Tanzania,

Innovation and productivity in formal and informal firms in Ghana

“…Our results show a more relevant role of innovation on firms' growth than the recent findings from the work of Goedhuys et al (2008Goedhuys et al ( , 2014, who found that supportive business environments have a greater influence on firms' performance than innovation activities. We also estimated different specifications in which we consider only technological innovations (products and process innovations) and the results are consistent with our main model (Appendix I).…”

“…However, recent 7 studies on the role of innovation on firms' productivity found a much weaker impact. Goedhuys et al (2008Goedhuys et al ( , 2014 focused on the importance of various sources of technological knowledge on firm's productivity in developing countries. In Tanzania, they found that firm productivity is not enhanced by R&D, either product or process innovation, but business environment seems to play a more relevant role.…”

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“…In addition, firms with greater foreign equity tend to be more efficient in terms of human resource management, and are more productive and more innovative than firms that are domestically-owned (Hallward-Driemeier et al 2006;Aydin et al 2007;Goedhuys et al 2008).…”