The influence of financing structure and financial performance expectations on SMEs' decision to uptake food process innovation in Tanzania

Abstract

Purpose Despite a continued public investment in promoting innovation, the uptake of process innovations among Tanzanian food processing small and medium enterprises (SMEs) has remained limited. This study examines the extent to which financing structure and expected financial performance shape SMEs' decisions to uptake food process innovations in Tanzania. Design/methodology/approach Data were collected through a survey of 317 food processing SMEs across four major regions in Tanzania and analyzed using structural equation modeling (SEM). Findings Findings show that both financing structure and expected financial performance have significant influence on the uptake of food process innovations, but differ in the strength of the influence. While the expected financial performance exerts a strong positive influence, financing structure shows a positive but comparatively weaker influence. Practical implications These findings imply that innovation promotion policies should go beyond financing provision and emphasize clear demonstration of financial benefits associated with the uptake of food process innovations. Enhancing SMEs' financial literacy and accessing suitable financing instruments may further strengthen the capacity of SMEs in adopting food process innovations. Originality/value To the best of our knowledge, this paper is among the first to offer an empirical analysis of investment decisions and innovation adoption among small food processing enterprises in a developing economy such as Tanzania. No similar study has been conducted in a developing economy.