From innovativeness to sales performance of IT-based SMEs in Tanzania: The mediating role of basic digital skills

Abstract

While innovativeness is consistently linked to superior performance in Small and Medium-sized Entreprises (SMEs), the specific mechanisms through which it drives sales growth in the context of Sub-Saharan Africa's digital economy remain underexplored. This study employed Entrepreneurial Orientation (EO) theory and Resource Based View (RBV) theory to investigate the mediating role of basic digital skills in the relationship between firm innovativeness and sales growth, focusing on Information Technology (IT)-based small and medium-sized enterprises (SMEs) in Tanzania. The research employs a quantitative, explanatory design, utilizing Partial Least Squares Structural Equation Modelling (PLS-SEM) to analyse data collected using five Likert scale questionnaire from 689 Tanzanian IT-based SMEs which were sampled using stratified sampling technique among 1200 Tanzanian IT-based SMEs. The results confirm a significant direct effect of innovativeness on sales growth. More importantly, the analysis reveals a significant indirect effect, demonstrating that basic digital skills partially mediate the relationship between innovativeness and sales performance. This indicates that a substantial portion of innovation's impact on growth is channelled through the firm's capacity to utilize fundamental digital tools for marketing, sales, and operational processes. The study concludes that basic digital skills are a crucial micro-foundational capability that translates innovative potential into tangible commercial outcomes. This research contributes to theory by unpacking a key mechanism in the innovation-performance relationship and provides practical implications for SME managers and policymakers in Tanzania. The study recommends that there is necessary to integrate basic digital literacy initiatives with innovation support programs to fully harness the growth potential of IT-based enterprises in emerging economies.