Determinants of Upgrading Micro-Manufacturing Enterprises: The Case of Metalworks in Morogoro Municipality in Tanzania

Abstract

This paper examines the factors that influence innovation-led enterprise upgrading of micro-manufacturing enterprises (MMEs) in the metalworks subsector in Tanzania. Following a desk review, primary cross-sectional data were collected from 285 randomly selected metalworks enterprises in Morogoro municipality. Most enterprises are micro- (employing an average of 2 people)
and are informal (73.7%). Probit model results confirm that the age of the owner, education level, working environment and public sector policies have a positive and significant influence on innovation, while the household size variable is innovation-inhibiting. OLS regression results show that, for registered enterprises, the use of modern technology, the experience of the owner and market competition are innovation-promoting. Being a cluster member has a positive growth effect as it provides access to modern technologies and markets. The findings point to a need for intensified efforts to accelerate technical education, deepen training in relevant skills, facilitate formalisation and reinvigorate cluster initiatives. Public policies need to be transparent and supportive of an environment in which the MMEs innovate and grow.

Keywords: Upgrading, micro-manufacturing enterprises, metalworks, technology, formalization