Innovation and Growth Potential: The case of fish traders in Tanzania

Abstract

The introduction of economic reforms in Third World countries since the late 1980s, turned thousands of laid off employees into instant entrepreneurs. Yet their increase in number was not matched by good performance. Since entrepreneurship is about introducing novel or superior solutions to economic problems, lack of economic performance is attributable to lack of innovation. This study compares the effect of innovation on entrepreneurial success to that of financial and social capital variables as alternative explanatory factors. The study was carried out in the cities of Dar-es-Salaam and Mwanza using a sample of 258 fish traders. Innovation was measured through proxy measures and data was analysed using hierarchical logistic modelling. Findings suggest that innovation is generally low among sample subjects, but its impact on performance is moderate and significant when both financial and social capital variables are present. However, both financial and social capitals offer superior predictive power than innovation. It is thus implied that adequate financing and proper networking should be sought to unleash the potential of innovative and visionary entrepreneurs in order to stimulate economic growth.