Abstract
Purpose
This study investigates the impact of business networking activities and governance mechanisms on the performance of small and medium tourism enterprises in Tanzania’s tourism industry. This study aims to provide insights into how networkig and governance can enhance operational efficiency, market access and overall performance.
Keywords
Citation
Buzohera, M.I. (2025), "Business networking and governance: impact on tourism SMTE performance in Tanzania", Tourism Critiques, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/TRC-08-2024-0045
Publisher
:Emerald Publishing Limited
Copyright © 2024, Mohamed Issa Buzohera.
License
Published in Tourism Critiques: Practice and Theory. Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
List of abbreviations
- SMEs
-
= small and medium enterprises;
- SMTEs
-
= small and medium tourism enterprises;
- SEM
-
= structural equation modeling;
- BN
-
= business networking;
- GM
-
= governance mechanisms;
- PLS-SEM
-
= partial least squares structural equation modeling;
- SBA
-
= small business administration; and
- NGOs
-
= nongovernmental organizations.
1. Introduction
In today’s rapidly evolving business landscape, the significance of business networking cannot be overstated, as it serves as a vital conduit for acquiring essential information and gaining access to resources crucial for the functioning of a venture (Anwar and Ali Shah, 2020). For small and medium tourism enterprises (SMTEs), effective networking is crucial, offering pathways for growth, collaboration and sustainability in a highly competitive market (Alfredo, 2023; Passaro et al., 2020).
Recent research has underscored the significance of small and medium enterprises (SMEs) in driving economic growth, particularly in the tourism sector. The SMEs play a pivotal role in creating employment opportunities, fostering innovation, optimizing resource utilization, distributing income and generating revenue for governments across both developed and developing economies (Nure et al., 2020; Turyakira et al., 2019). The focus on SMEs has garnered significant attention from policymakers and academics, prompting calls for additional research in the field (O’Connor, 2023; Adomako et al., 2016), underscoring the overall importance of developing strategies to enhance SMEs performance (Sendawula et al., 2021).
However, despite their crucial roles, SMEs including in tourism sector often exhibit subpar performance. Research in developed economies, such as the USA, indicates that the sustainability of SMEs is precarious, with only 50% of newly established SMEs surviving up to 5 years, and a further decline to 33% survival beyond 10 years (SBA, 2014). Similarly, challenges affecting the performance of SMEs are common across developing economies, including the tourism sector in East Africa. For instance, Mayanja (2020) highlighted profitability challenges faced by SMEs in Uganda. In addition, the study by Mutenyo et al. (2021) identified that factors such as initial capital, business registration, experience and gender positively impact the performance of Tourism SMTEs in Uganda. These findings underscore the importance of business foundation and management in driving performance outcomes. In this context, networking and governance mechanisms, if well investigated, could further enhance the performance of these businesses by providing essential mechanism to access resources, such as access to capital, market information and partnerships.
Building on these insights, the performance of SMTEs in Tanzania similarly faces a range of challenges, as documented in existing studies, which, while comparable to those in Uganda and Kenya, underscore the need for targeted interventions addressing foundational business factors and the strategic role of networking and governance mechanisms to enhance performance outcomes, thereby reflecting broader regional issues affecting SME performance.
In Tanzania, one significant challenge for SMTEs is the tax environment. Abdul-Rahim et al. (2024) emphasized that excessive taxes and levies substantially raise operational costs, thereby reducing profit margins and threatening the viability of businesses, including hotels, tour operators and restaurants. Likewise, David and Musabila (2021) underscored the importance of stakeholder relationships in fostering sustainable tourism in Dodoma, Tanzania, finding that inclusive, participatory approaches can enhance collaboration and address sector challenges. This aligns with the current study’s investigation into how business networking and governance mechanisms can mitigate external constraints like taxation and enhance SMTE performance.
Furthermore, environmental sustainability is another pressing concern in this context. Kyara et al. (2022) identified the environmental pressures caused by tourism growth, including resource depletion and ecosystem strain in Tanzania. They suggest that business networking can facilitate collaboration among tourism operators, communities and environmental agencies to share resources and strategies for minimizing environmental impacts. Governance mechanisms within these networks can further ensure accountability and alignment with sustainability goals, highlighting the dual role of networking and governance in improving SMTE performance and promoting sustainable tourism.
In addition, domestic tourism promotion faces challenges in this context, as noted by Bakari (2021), who identified barriers such as poor marketing, high service costs and inadequate government support in Serengeti National Park. Business networking could address these challenges by fostering collaboration between stakeholders to develop affordable packages, improve service quality and advocate for supportive policies. Further studies within the context have reported a significant mismatch in both the quantity and quality of skills in the tourism sector (Anderson et al., 2020). These challenges underscore the urgent need for innovative approaches to enhance industry performance. Anderson et al. (2020) emphasized the importance of addressing skill shortages, advocating for competency-based skills development as a critical intervention to improve the sustainability and competitiveness of tourism enterprises. Building on this, this study speculates that well-managed business networking could be a potential strategy to address these challenges. Networking between SMTEs and training institutions, if effectively leveraged, may play a pivotal role in bridging skill gaps by fostering collaboration and facilitating access to essential knowledge, a relationship that warrants further investigation.
Similar challenges in the tourism sector are evident across the region. For instance, Mayanja (2020) highlighted the profitability struggles faced by SMEs in Uganda, while Kenya, a key competitor to Tanzania in tourism, faces significant obstacles that undermine the growth and sustainability of its industry. Studies in Kenya assert that centralized tourism policies prioritize well-established regions like the Maasai Mara while neglecting untapped areas with significant potential (Holland et al., 2022). Moreover, inadequate and deteriorating infrastructure continues to constrain growth, negatively impacting both tourism development and local livelihoods (Fay, 2023). Compounding these issues, marketing challenges persist, as many SMTEs lack the resources and expertise necessary to compete effectively on a global scale.
The regional challenges faced by neighboring countries, such as Uganda and Kenya, closely mirror the issues encountered by Tanzanian SMTEs, including limited financial resources, bureaucratic obstacles and a lack of skilled labor (Mrisho, 2023; Ismail and Mohamad, 2022). Moreover, studies specific to the Tanzanian context highlight additional hurdles such as market competitiveness, technological constraints and regulatory burdens (Nkwabi and Mboya, 2019). These systemic challenges underscore the critical role of business networking and governance mechanisms in fostering resource sharing, collaboration and strategic alignment, thereby enhancing the performance and sustainability of SMTEs in Tanzania’s tourism sector. Networking presents a viable solution to these challenges. Collaboration between SMTEs and governments can promote infrastructure improvements and equitable regional investments. Furthermore, networking facilitates resource sharing, joint marketing strategies and broader market access, thereby enhancing SMTE competitiveness. However, challenges in the tourism sector across the region have led to several adverse outcomes. For instance, the performance of Tanzania’s tourism industry remains below expectations, characterized by a limited market share, low sales volumes and a relatively small number of international tourists compared to regional competitors (George Mung’ong’o et al., 2023; David and Musabila, 2021; Ali, 2018).
These conditions indicate that the tourism sector in Tanzania is not fully capitalizing on its resources and attractions, leading to underperformance in a market where it could otherwise thrive. This suggests that should the present trajectory persist; it may result in the closure of many SMTEs in Tanzania. Therefore, there is an imperative to investigate viable strategies to enhance SMTEs performance, aiming to foster inclusive and sustainable economic growth.
The existing literature offers valuable insights into strategies aimed at enhancing SMTEs performance. Moreover, research underscores the importance of effective business networking in bolstering the competitiveness and sustainability of enterprises. The concept of business networking, originating from the networking theory proposed by Johanson and Mattsson (1988), emphasizes the advantages of networking for firms. It facilitates cooperation, collaboration and the exchange of knowledge and resources, thereby influencing firm behavior and resulting in improved performance.
Researchers have endorsed the notion of networking, highlighting how entrepreneurial networking empowers small businesses to forge both formal and informal connections with customers, suppliers, financial institutions and other stakeholders, thereby garnering the necessary support for business performance (Sendawula et al., 2021). Therefore, entrepreneurial networks have become crucial tactics for small enterprises to acquire resources, particularly in developing regions where formal institutions display hesitancy in engaging with them (Anwar and Ali Shah, 2020; Xu et al., 2018).
Further research is essential to bridge the gap in understanding the relationship between networking activities and SMTE performance. While networking has been widely acknowledged as a pathway for resource acquisition, collaboration and competitive advantage (Anwar and Ali Shah, 2020), studies indicate that its effectiveness often depends on strategic alignment and governance. For instance, McCartan (2023) and Jiang et al. (2018) cautioned that poorly managed networking efforts may fail to yield desired outcomes, whereas Li and Zhou (2010) suggested that networking does not always result in superior venture performance. These insights emphasized the need for SMTEs to strategically manage and align their networking activities with organizational goals to achieve tangible benefits. Without effective governance mechanisms to regulate interactions, foster trust and ensure accountability, networking alone may not suffice in enhancing performance.
This study uniquely examines how governance mechanisms mediate the relationship between networking and performance, particularly within Tanzania’s resource constrained tourism sector, a context that remains underexplored in existing literature. Despite its significant potential to inform strategies for addressing challenges faced by SMTEs in developing economies, the role of governance as a mediator in this relationship represents a novel contribution to the literature. Governance structures, such as rules, norms and decision-making processes, play a critical role in aligning network activities with strategic objectives, enhancing operational efficiency and fostering resilience. While existing research often explores the direct impact of networking on SME performance in stable environments, limited attention has been given to how governance structures influence these dynamics in developing economies like Tanzania.
By addressing this gap, the study integrates Business Network Theory (Johanson and Mattsson, 1988) and Institutional Theory (Meyer and Rowan, 1977) to examine how relational ties enable access to resources and markets and how governance mechanisms align networking efforts with institutional norms. These theoretical perspectives provide a framework for understanding the mediating role of governance in enhancing SMTE performance.
The findings offer both theoretical and practical contributions. Academically, the study advances understanding of the interplay between networking dynamics and governance structures in shaping enterprise outcomes. Practically, it delivers a strategic framework for SMTE owners, managers and policymakers to optimize networking activities through governance mechanisms. By addressing challenges such as limited access to finance, poor infrastructure and bureaucratic obstacles, the study provides actionable recommendations to improve performance, expand market access and foster sustainability, thereby strengthening the growth and resilience of SMTEs in complex and challenging environments.
2. Literature review
2.1 Theoretical foundation
This study is anchored in two primary theoretical frameworks: business network theory by Johanson and Mattsson (1988) and institutional theory by Meyer and Rowan (1977) and the extended work on governance mechanisms by Meyer et al. (2017), which together provide a robust foundation for examining the relationship between business networking, governance mechanisms and SMTE performance.
Business network theory, introduced by Johanson and Mattsson (1988), posits that firms operate within interconnected networks rather than in isolation. These networks enable businesses to access vital resources, such as information, financial capital and strategic partnerships, which are critical for their competitiveness and growth. The theory highlights three key dimensions of networking: network penetration, network integration and network extension, each describing the depth, interconnectivity and breadth of a firm’s network relationships. In the context of SMTEs, this theory underscores how effective networking facilitates collaboration and resource exchange, ultimately influencing performance outcomes.
While the benefits of networking are well documented, existing studies often fail to account for the structural mechanisms that govern these relationships. This is where institutional theory, particularly its emphasis on organizational norms, rules and practices, becomes relevant (Meyer, Greenwood, and Oliver, 2017). Institutional theory explains how governance mechanisms is defined as the rules, norms and decision-making processes within business networks shape and regulate firm behavior. These mechanisms ensure that network activities align with organizational goals, fostering trust, accountability and collaboration among network participants.
Incorporating governance mechanisms as mediators within the business network framework is a novel approach. While prior research emphasizes the direct benefits of networking, such as resource acquisition and market access, it often overlooks the procedural elements that enhance these outcomes. This study addresses this gap by hypothesizing that governance mechanisms act as an intermediary, ensuring that networking efforts are effectively translated into performance improvements for SMTEs.
The application of these theories to the Tanzanian tourism sector further strengthens their relevance. In Tanzania, where SMTEs face systemic challenges such as regulatory constraints, inadequate infrastructure and limited market access, governance mechanisms become critical for navigating these barriers. Business network theory provides a lens to analyze how networking relationships facilitate access to resources, whereas institutional theory explains how governance practices mitigate risks and enhance the effectiveness of these relationships. By integrating these frameworks, this study not only advances theoretical understanding but also offers practical insights into how SMTEs can optimize their networking strategies and governance structures to improve performance. This dual theory approach ensures a comprehensive examination of the study variables, providing a solid foundation for both the conceptual model and empirical analysis.
2.2 Empirical review and hypotheses development
2.2.1 Business networking and small and medium tourism enterprises performance.
The relationship between business networking and SMTEs performance has garnered considerable attention in the literature. Business networking encompasses the establishment and maintenance of relationships with various stakeholders such as customers, suppliers, competitors, industry peers and regulatory bodies, aimed at exchanging resources, knowledge and support (Johanson and Mattsson, 1988). In the context of the tourism sector, networking involves building strategic connections with a diverse range of actors, including local tourism authorities, travel agents, hotel operators, tour guides, transportation providers and local communities. For instance, a tourism operator may establish networks with local hotel owners to secure accommodations for tourists while also collaborating with transportation providers to arrange travel logistics. Similarly, establishing connections with government agencies or tourism boards can help businesses stay informed about regulatory changes, marketing initiatives and opportunities for partnership in promoting tourism packages. Networking also involves the sharing of local knowledge among businesses, such as insights into popular tourist attractions, cultural events or seasonal trends, which can enhance the service offerings of businesses within the network. These interactions help build trust, facilitate collaboration and create opportunities for mutual support, ultimately contributing to the competitive advantage and sustainability of tourism businesses.
Past studies have indicated that effective networking can significantly impact the performance of SMTEs by providing access to crucial resources, fostering collaboration and enhancing competitive advantage (Anwar and Ali Shah, 2020; Passaro et al., 2020). For instance, financial networking serves as a conduit for accessing vital channels of financial resources within business networks.
Accordingly, managers who possess extensive networks are more likely to enjoy enhanced access to financial support (Liu et al., 2016). In addition, formal networking arrangements, such as participation in business and industry events, play a pivotal role in augmenting the performance of new ventures. These formal networks provide firms with invaluable market intelligence, financial assistance, managerial expertise, technical knowhow and various other business services (Saha and Banerjee, 2015).
Moreover, previous studies by Bratkovič Kregar and Antončič (2016) as well as Palalić et al. (2018) have highlighted a substantial positive correlation between business networks and the sustainable performance of small enterprises. Despite the acknowledgment by scholars and the establishment of networking relationships, studies have debated the direct relationship between networking activities and SMTEs performance, as in some cases, networking efforts do not always translate into improved performance outcomes (McCartan, 2023; Abbas et al., 2019). Therefore, this discrepancy necessitates further investigation and empirical testing of the relationship, particularly in the context of Tanzanian SMTEs:
There is a positive relationship between business networking activities and performance of SMTEs.
2.2.2 Business networking and small and medium tourism enterprises performance with mediating effects of governance mechanisms.
Monks and Minow (2011) defined governance as the structure that ensures that decisions are made to determine long-term, sustainable value for an organization. Governance mechanisms within business networks might play a vital role in shaping the dynamics of networking activities and their impact on SMTEs performance. Governance mechanisms refer to the structures and processes that govern the operations and decision-making within business networks, ensuring effective collaboration and goal achievement (Monks and Minow, 2011).
Previous research has suggested that the effectiveness of governance mechanisms in several aspects of business operations. For instance, Horstmeyer and Wells (2020) underscored the importance of considering both internal and external governance mechanisms to maximize shareholder value. The findings suggest that the effectiveness of governance mechanisms is contingent upon the economic conditions in which firms operate.
In this study, the concept of governance mechanisms has been adopted and contextualized within the tourism sector as the structures and processes that govern the management of business networks in tourism related activities. Network governance mechanisms refer to the decision-making processes, rules, norms and power dynamics that regulate interactions between key stakeholders in the tourism value chain, such as tour operators, hotels, suppliers and government agencies. For example, formal governance mechanisms may include contracts or agreements between hotel owners and tour operators that define service expectations, pricing and performance standards. Informal governance mechanisms might involve shared norms, such as trust and mutual understanding, between local tour guides and hospitality businesses.
These mechanisms ensure that network activities are aligned with the interests and objectives of all network participants, facilitating cooperation, coordination and value creation within the tourism ecosystem. Therefore, it is hypothesized that effective network governance mechanisms will enhance the relationship between networking and performance by ensuring that all participants in the tourism network are working toward common goals, reducing conflicts and promoting the efficient use of resources.
Despite the well-established importance of networking for SMTEs, the empirical evidence regarding its impact on SME performance remains inconsistent. While numerous studies suggest a positive relationship between networking activities and SME performance, others report mixed or negligible effects. For instance, some research highlights that networking facilitates access to crucial resources, enhances market access and improves operational efficiency, leading to improved performance outcomes (McCartan, 2023). However, other studies, such as Li and Zhou (2010), found that networking efforts do not always translate into better performance, with firms failing to leverage their networks effectively.
This inconsistency in findings points to the need for further exploration into the underlying dynamics of how networking activities influence SME performance, particularly in developing economies like Tanzania. One key issue is the mechanisms through which networking leads to positive outcomes, which remain underexplored. Canestrino and Forouharfar (2021) argued that while networking can provide valuable connections, its benefits are not always realized unless appropriate mechanisms are in place to govern and manage these relationships effectively.
In the context of Tanzania, where SMTEs face significant challenges such as limited access to finance, poor infrastructure, bureaucratic obstacles and a lack of skilled labor (Mrisho, 2023; Ismail and Mohamad, 2022), additional barriers further hinder their performance and growth. Limited access to information and market knowledge is another significant challenge, as many SMTEs struggle to keep up with industry trends, consumer preferences and technological advancements (Nkwabi and Mboya, 2019). Furthermore, the lack of effective marketing strategies makes it difficult for SMTEs to attract both domestic and international tourists, thereby limiting their reach and profitability (Bakari, 2021). Another pressing issue is government neglect in providing sufficient support for the domestic tourism sector, especially in terms of policy formulation and implementation, which is often seen as detrimental to the growth of SMTEs (Amani, 2024). Moreover, high service costs and poor service quality, particularly in popular tourist destinations like Serengeti, are significant barriers to SMTE competitiveness (Bakari, 2021).
These challenges underscore the need for enhanced business networking and governance mechanisms to address these systemic issues and improve the performance of SMTEs in Tanzania’s tourism sector. Governance mechanisms play a critical role in ensuring that networking activities are both efficient and aligned with business goals. The absence of governance structures may lead to fragmented or misaligned efforts, reducing the potential benefits of networking. Therefore, integrating effective governance mechanisms can significantly enhance the positive impact of networking by fostering collaboration, ensuring accountability and aligning network activities with the broader objectives of SMTEs. By examining these governance mechanisms, this study seeks to address the research gap and clarify how they mediate the relationship between networking and performance outcomes for SMTEs in Tanzania’s tourism sector:
The level of business networking activities within SMTEs positively influences the effectiveness of governance mechanisms within their business networks.
Governance mechanisms moderate the relationship between business networking activities and performance of SMTEs.
2.2.3 Knowledge gaps and research problem.
The literature provides significant evidence of the role of business networking in enhancing the performance of SMTEs. Business networking enables firms to access crucial resources, foster collaboration and achieve competitive advantages (Anwar and Ali Shah, 2020); Passaro et al., 2020). These benefits have been widely acknowledged in studies on both developed and developing economies, demonstrating the ability of networking to improve resource acquisition, market access and operational efficiency (Turyakira et al., 2019; Alfredo, 2023). Despite this consensus, inconsistencies and gaps remain regarding the direct and mediated impacts of networking on performance.
First, while Johanson and Mattsson’s (1988) business network theory provides a robust framework for understanding the advantages of networking, empirical studies reveal mixed results. Some research demonstrates a strong positive relationship between networking and SME performance (McCartan, 2023; Anwar and Ali Shah, 2020), yet others, such as Li and Zhou (2010), indicate that networking does not always lead to improved outcomes. This disparity highlights the need to explore contextual and mediating factors that influence this relationship.
Second, most of the existing studies are heavily skewed toward developed economies, where SMEs typically operate within well-structured institutional frameworks (Sendawula et al., 2021). This leaves a significant gap in understanding how networking impacts SMTEs in developing countries, such as Tanzania, where institutional support is often weak, and firms face unique challenges, including regulatory burdens, limited infrastructure and constrained market access (Mrisho, 2023; Nkwabi and Mboya, 2019).
In addition, while governance mechanisms are acknowledged as critical in aligning networking activities with organizational objectives, limited empirical evidence exists on their role as mediators in the networking performance relationship (Monks and Minow, 2011; Horstmeyer and Wells, 2020). Existing research primarily focuses on the direct impact of networking, neglecting the structural and procedural elements provided by governance mechanisms that could enhance or moderate the efficacy of networking efforts.
Finally, specific to Tanzania’s tourism sector, SMTEs struggle with various systemic challenges, including limited market competitiveness, financial constraints and bureaucratic inefficiencies (Ismail and Mohamad, 2022; George Mung’ong’o et al., 2023). Despite their critical contribution to economic growth, SMTEs continue to underperform compared to their counterparts in other regional economies. This underperformance underscores the need for a deeper exploration of mechanisms, such as networking and governance, that can amplify their performance.
2.2.4 Conceptual model.
The conceptual model used in this study illustrates the relationships among business networking, governance mechanisms and the performance of SMTEs. It posits that business networking activities, which involve establishing and maintaining relationships with various stakeholders, have a positive influence on SMTEs’ performance by facilitating access to resources, fostering collaboration and enhancing competitive advantage. The performance of SMTEs is assessed through both financial and nonfinancial metrics, such as return on investment and customer satisfaction. Governance mechanisms, including decision-making processes, rules, norms and power dynamics, are hypothesized to moderate the relationship between networking activities and performance, shaping the effectiveness of these networking efforts. This model, as illustrated in Figure 1, aims to provide insights into the interactions between business network dynamics and governance mechanisms in influencing SMTE performance across multiple dimensions.
3. Methodology
3.1 Sampling, sample size and data collection
The study population comprises SMTEs. A sample of 383 tourism-related businesses was selected using the convenience sampling method. Convenience sampling is a non-probability sampling method that involves selecting participants based on their accessibility and willingness to participate (Zikmund et al., 2009). This technique is particularly useful in situations where obtaining a random or representative sample is impractical due to logistical challenges or the absence of a comprehensive sampling frame (Saunders et al., 2009). As noted by Jawad Golzar (2022), potential biases associated with convenience sampling can be mitigated by evaluating and enhancing the representativeness of the sample, prioritizing diversity in participant selection and incorporating supplementary data to provide a broader context.
In this study, a convenience sampling approach was adopted due to the absence of an exhaustive sampling frame for SMTEs, a common limitation in developing countries (Wang et al., 2024). Despite this, measures were implemented to minimize bias. Data were collected from multiple SMTE subsectors, including accommodation providers, tour operators and travel agencies, restaurants and services and transportation providers, ensuring diversity and coverage.
In addition, data collection was conducted across different tourism seasons low, medium and high to capture variations in operational contexts and reduce seasonal bias. The sample size was substantial, exceeding the recommended minimum of 200 respondents necessary for conducting robust multivariate analysis (Hair et al., 2010). These strategies enhanced the validity and reliability of the findings while addressing the limitations typically associated with convenience sampling.
This study used a quantitative survey methodology, utilizing a self-administered questionnaire to investigate the relationships between the selected variables and achieve the study objectives The questionnaire used a five-point Likert scale to measure the perceptions of respondents, who were salaried managers and owner-managers, on various aspects relevant to the study. The selection of managers as respondents was intentional, given their central role in decision-making and operational management, which positions them as reliable informants regarding the study variables (Zuhroh and Rini, 2024; Jovanova-Simeva and Dimovska, 2023).
Furthermore, as highlighted by Bodur et al. (2024), the Likert scale was chosen for its effectiveness in capturing nuanced attitudes and perceptions, enabling respondents to express varying levels of agreement or disagreement with the statements provided. Likert scales are also widely recognized in social science research for their simplicity, ease of use and suitability for measuring latent constructs such as perceptions, attitudes and beliefs (Rokeman, 2024; Hair et al., 2010). This approach facilitated the collection of comprehensive, quantifiable data, ensuring the results were appropriate for robust statistical analysis within the study’s framework.
3.2 Measurement of variables
To gauge the business networking activities of SMTEs, owners and managers were requested to assess the time allocated in the past year toward establishing connections with buyers, suppliers, competitors and other pertinent stakeholders. This measurement approach was adapted and refined from earlier research (Anwar and Ali Shah, 2020; Xu et al., 2018). The study distinctly incorporated three variables drawn from Johanson and Mattsson’s (1988) networking theory: network penetration, network integration and network extension, which were formulated into Likert-style questions.
Regarding SMTEs performance, both financial and nonfinancial metrics were considered in this study. Financial performance measures were used to enable decision-makers to better predict the future outcomes for SMTEs. The Likert scale type for measuring the perception of financial performance was adopted from a study by Ismail and Mohamad (2022). In addition, SMTEs performance was assessed using items related to financial performance and nonfinancial performance, adopted from Kantur (2016). Owners and managers were asked to rate their ventures’ performance on a scale ranging from extremely declined (1) to extremely improved (5) based on financial performance return on investment and market performance customer satisfaction.
Governance mechanisms within business networks were measured using two items: procedures and mechanisms used within the business network for decision-making and norms, rules and guidelines governing the behavior and interactions of network participants. These measurements were obtained from the institutional theory proposed by Meyer et al. (2017). Tables 1 and 2 present distinct aspects of the study: Table 1 outlines the measurements of variables, whereas Table 2 provides an overview of the diverse range of tourism sectors represented.
3.3 Data analysis and results
The study used structural equation modeling (SEM) using AMOS, a covariance-based structural equation modeling (CB-SEM) technique, to test the hypothesized relationships among the study constructs. CB-SEM was chosen for its robustness in confirmatory analyses and its ability to evaluate the overall model fit comprehensively (Vuković, 2024). In addition, partial least squares structural equation modeling (PLS-SEM) was used to conduct multivariate analysis across samples involving different categories of SMTEs. PLS-SEM was particularly appropriate for this aspect of the study due to its flexibility in handling complex models with latent variables and its suitability for exploratory analyses in scenarios with varying sample sizes and data distributions (Jhantasana, 2023). By leveraging both CB-SEM and PLS-SEM, the study ensured a rigorous examination of the relationships and variations across SMTE subsectors, providing deeper insights into the dynamics of business networking, performance and governance mechanisms.
3.3.1 Sectoral and networking profile of surveyed small and medium tourism enterprises.
The characteristics of the respondents were analyzed to provide insights into the suitability of the sample, which included a total of 383 SMTEs. In terms of managerial positions within the SMTEs, 275 respondents were salaried managers, whereas 108 were owner-managers. The sample encompassed a range of sectors within the tourism industry, with restaurants and services representing the largest category at 30% of the total sample. Other notable sectors included tour operators and travel agencies, which collectively accounted for 27.7%. Accommodation providers comprised 20.9%, while transportation providers made up 21.4% of the sample. These sectors reflect the diversity of SMTEs included in the study. All SMTEs reported engaging in various forms of business networking relationships. The surveyed SMTEs actively engage in networking across various capacities, including building relationships with customers and clients, collaborating with other SMTEs and connecting with investors and financiers. These diverse networking activities reflect the multifaceted approach SMTEs adopt to enhance their operations and foster growth. Table 3 provides an overview of the diverse range of tourism sectors represented in the study.
3.3.2 Model specification overview.
The study uses SEM to explore the relationships among business networking (BN), governance mechanisms (GM) and SMTE performance (SMTEsP). The model is specified based on the conceptual framework and supported by theoretical and empirical literature.
3.3.2.1 Key components of the model specification.
Variables and constructs
Exogenous variable (Independent):
Business networking (BN): A latent construct measured by three indicators (BN1, BN2 and BN3).
Endogenous variables:
Governance mechanisms (GM): A mediating latent construct measured by three indicators (GM1, GM2 and GM3).
SMTEsP: A dependent latent construct measured by four indicators (PF1, PF2, PF3 and PF4).
Relationships hypothesized
Direct effect:
H1: Business networking (BN) has a positive impact on SMTE performance (SMTEsP).
H2: Business networking (BN) positively influences governance mechanisms (GM).
Mediation effect:
H3: Governance mechanisms (GM) mediate the relationship between business networking (BN) and SMTE performance (SMTEsP).
The study incorporates a path diagram to visually depict the model's structure, highlighting the relationships among the variables:
BN → GM (direct path).
BN → SMTEsP (direct path).
BN → GM → SMTEsP (indirect path).
3.3.3 Results of the measurement model’s assessment.
The measurement model was assessed to ensure the reliability, validity and overall fitness of the constructs. The confirmatory factor analysis (CFA) results demonstrated satisfactory outcomes, with all constructs meeting established criteria. Composite reliability (CR) values exceeded the recommended threshold of 0.70, confirming adequate internal consistency (Hair et al., 2017). Average variance extracted (AVE) values met or surpassed the minimum threshold of 0.50, indicating sufficient convergent validity and confirming that each construct explained at least 50% of the variance in its indicators (Fornell and Larcker, 1981). The detailed results supporting these findings are summarized in Table 2.
3.3.3.1 Business networking.
The Business Networking construct was measured using three indicators: BN1, BN2 and BN3. The standardized factor loadings for these indicators were 0.783, 0.898 and 0.685, respectively, all exceeding the threshold of 0.5. The CR for BN was 0.834, indicating good reliability, whereas the AVE was 0.629, surpassing the recommended minimum of 0.5 (Fornell and Larcker, 1981).
3.3.3.2 Governance mechanisms.
The Governance Mechanisms construct was assessed with three indicators: GM1, GM2 and GM3. Their standardized factor loadings were 0.692, 0.917 and 0.891, respectively, all exceeding the threshold of 0.5. The CR was 0.876, and the AVE was 0.705, indicating strong reliability and convergent validity.
3.3.3.3 SMTEs performance.
SMTE Performance was measured using four indicators: PF1, PF2, PF3 and PF4, with standardized factor loadings of 0.861, 0.904, 0.861 and 0.811, respectively. The CR for SMTEsP was 0.919, and the AVE was 0.739, reflecting excellent reliability and validity for this construct.
3.3.4 Model fit indices.
The overall model fit was assessed using multiple indices to evaluate its goodness of fit, all of which demonstrated satisfactory results. The Chi-square to degrees of freedom ratio (CMIN/DF) was 2.209, well within the recommended threshold of ≤3, indicating an acceptable model fit (Hair et al., 2017). The root mean square error of approximation (RMSEA) value was 0.056, falling within the acceptable range of ≤0.08, with a PCLOSE value of 0.262, which further suggested a good fit (Browne and Cudeck, 1993). The standardized root mean square residual (SRMR) was 0.0451, meeting the threshold of ≤0.08 (Hu and Bentler, 1999). Furthermore, the comparative fit index (CFI), incremental fit index (IFI) and Tucker–Lewis index (TLI) were all 0.985, exceeding the minimum threshold of 0.9, reflecting an excellent model fit (Bentler, 1990). The normed fit index (NFI) was 0.973 and the TLI was 0.979, further confirming the robust fit of the model.
The results indicate that the measurement model aligns well with the data, with all fit indices exceeding the recommended thresholds. These strong fit indices (e.g. RMSEA = 0.056, CFI = 0.985, NFI = 0.973) suggest that the hypothesized relationships among the constructs are well-supported by the data. In addition, the reliability and validity of all constructs were confirmed, as factor loadings exceeded 0.5, composite reliability surpassed 0.7 and AVE values exceeded 0.5 for all constructs. The detailed demonstration of the fit indices is presented in Table 4.
3.3.5 Results of the structural model and hypothesis testing.
The study used SEM using AMOS to test the proposed hypotheses. SEM, a robust statistical technique, enables the analysis of complex relationships between latent variables measured through multiple indicators while accounting for measurement errors (Hair et al., 2010). This approach was used to evaluate three key hypotheses. The results of the SEM analysis are presented in Table 5, showcasing the relationships among the constructs and the fit of the overall model. In addition, PLS-SEM was used to perform a multigroup analysis. This analysis was conducted to reveal the differences among the categories of SMTEs in the sample. The results of the PLS-SEM analysis are detailed in Table 6
Business networking (BN) has a positive relationship with the performance of tourism SMTEs (SMTEsP).
Business networking activities positively influence the effectiveness of governance mechanisms (GM) within business networks.
Governance mechanisms mediate the relationship between business networking activities and the performance of tourism SMTEs.
3.3.5.1 Direct relationship between business networking and SMTEs performance (H1).
The analysis reveals a significant positive direct effect of business networking on SMTE performance, with an estimate of 0.474 (p < 0.001). This finding supports H1, indicating that higher levels of business networking activities are strongly associated with improved performance outcomes for SMTEs. These results highlight the direct role of networking in enhancing resource access, collaboration and competitiveness, thereby driving SMTE success.
3.3.5.2 Relationship between business networking and governance mechanisms (H2).
The study confirms H2, showing a significant positive effect of business networking on governance mechanisms, with an estimate of 0.705 (p < 0.001). This demonstrates that increased networking activities enhance the effectiveness of governance mechanisms within SMTE business networks. These mechanisms ensure structured interactions, foster trust and promote coordinated decision-making, amplifying the benefits of networking activities.
3.3.5.3 Mediation effect of governance mechanisms (H3).
The mediation effect of governance mechanisms on the relationship between business networking and SMTE performance is significant, with an estimate of 0.316 (p = 0.030). This confirms H3, emphasizing the critical role of governance mechanisms in mediating and amplifying the positive outcomes of networking activities.
After introducing governance mechanisms into the model, the direct effect of business networking on SMTE performance becomes statistically insignificant (estimate = 0.112, p = 0.341). This result suggests full mediation, indicating that governance mechanisms act as a vital intermediary, translating networking efforts into enhanced performance. Without governance mechanisms, the direct influence of networking on performance is minimal. These findings fully align with Baron and Kenny’s (1986) mediation framework. The introduction of governance mechanisms significantly reduces the direct effect of business networking on SMTE performance to nonsignificance, indicating full mediation. Governance mechanisms effectively channel the benefits of networking activities into improved performance, emphasizing their pivotal role in optimizing SMTE outcomes.
3.3.5.4 Results of the multigroup analysis.
As the final step in the analysis, the study examined the differences in the effects of business networking (BN) and governance mechanisms (GM) on performance (PF) across various SMTE subsectors: accommodation providers, restaurants and services, tour operators and travel agencies and transport providers. This analysis was conducted using multigroup analysis PLS-SEM, as shown in Table 6.
The findings revealed no significant differences in the relationships across all hypothesized paths. For instance, the effect of BN on GM was consistent across all subsectors, with path differences ranging from −0.021 (accommodation vs transport providers, p = 0.823) to 0.009 (restaurants and services vs tour operators and travel agencies, p = 0.882). Similarly, the impact of BN on PF showed no significant differences, with path differences ranging from 0.033 (restaurants and services vs transport providers, p = 0.845) to 0.361 (accommodation vs tour operators and travel agencies, p = 0.171).
Moreover, the indirect effect of BN on PF through GM also displayed no significant variation among the subsectors, with path differences ranging from −0.095 (restaurants and services vs transport providers, p = 0.529) to −0.289 (accommodation vs tour operators and travel agencies, p = 0.149). These results indicate that the influence of business networking and governance mechanisms on SMTE performance is generally consistent across different tourism subsectors.
3.4 Discussion of the results
The findings of this study offer significant insights into the intricate relationships among business networking activities, governance mechanisms and the performance of SMTEs in Tanzania. These results provide empirical validation for theoretical frameworks such as business network theory (Johanson and Mattsson, 1988) and institutional theory (Meyer et al., 2017), highlighting their relevance in the context of resource constrained environments like Tanzania.
The analysis reveals that business networking activities positively influence the performance of SMTEs, with governance mechanisms serving as a critical mediator. Specifically, the study demonstrates a strong direct effect of business networking on governance mechanisms, which in turn enhances SMTE performance. The mediation analysis indicates that governance mechanisms fully mediate the relationship between networking activities and SMTE performance, underscoring their pivotal role in translating networking efforts into tangible performance gains.
Furthermore, the multigroup analysis demonstrates consistency in these relationships across different SMTE subsectors, reinforcing the robustness of the findings. The absence of significant differences in the relationships among constructs suggests that the hypothesized paths, such as the influence of business networking and governance mechanisms on SMTE performance, are consistently applicable across various groups within SMTEs. This enhances the generalizability of the findings across all selected tourism sectors. In addition, the results highlight the central role of business networking and governance mechanisms in addressing the systemic challenges faced by SMTEs.
Networking facilitates access to essential resources, such as financial capital, market information and strategic partnerships. These findings align with Johanson and Mattsson’s business network theory, which emphasizes the importance of interconnected relationships in fostering collaboration and gaining a competitive advantage. In the Tanzanian tourism context, networking enables SMTEs to overcome resource constraints, navigate bureaucratic challenges and improve operational efficiency. The positive correlation between networking and SMTE performance corroborates previous studies (e.g. Anwar and Ali Shah, 2020; Passaro et al., 2020), highlighting the strategic importance of networking in enhancing firm performance.
Governance mechanisms are vital in aligning networking activities with organizational objectives. Governance structures including rules, norms and decision-making frameworks foster trust, accountability and coordination among network participants. These findings extend institutional theory by illustrating how governance mechanisms mediate the relationship between networking and performance. Effective governance ensures that the benefits of networking are maximized by mitigating risks associated with informal networks and promoting structured collaboration. Performance outcomes, measured through financial and nonfinancial metrics, such as return on investment and customer satisfaction, are significantly influenced by the integration of networking and governance. The findings resonate with literature emphasizing the importance of governance in optimizing network dynamics for sustainable performance gains (Horstmeyer and Wells, 2020; Monks and Minow, 2011).
The findings of this study address the ongoing debate on the role of networking in enhancing firm performance by filling gaps in the existing literature. While studies such as Li and Zhou (2010), Canestrino and Forouharfar (2021), McCartan (2023) and Abbas et al. (2019) argued that networking efforts do not always lead to better performance due to firms’ inability to effectively use their networks, others, such as Palalić et al. (2018), (Anwar and Ali Shah, 2020) and Passaro et al. (2020), highlight the positive impact of networking on resource access, market reach and operational efficiency, ultimately improving performance.
This study reconciles these contrasting perspectives by showing that the effectiveness of networking for SMTEs in Tanzania depends on proper governance mechanisms. Specifically, it emphasizes key governance variables, including decision-making processes, adherence to rules and norms and the management of power dynamics, as critical mediators between networking and performance. These governance mechanisms ensure that networking efforts are strategic, coordinated and aligned with performance objectives, thereby enhancing their impact.
Furthermore, this study’s findings contribute to the broader discourse on business networking and governance in developing economies. The results validate the assertions of researchers such as Sendawula et al. (2021), who emphasized that networking facilitates resource acquisition and market access for SMEs. In addition, the study aligns with discussions by McCartan (2023) and Abbas et al. (2019) on the conditional nature of networking benefits, highlighting governance as a critical factor. In the Tanzanian context, the study integrates insights from prior research identifying systemic challenges such as excessive taxation and limited market access faced by SMTEs (Abdul-Rahim et al., 2024; Bakari, 2021). Networking offers a pathway to mitigate these barriers by fostering collaborations with policymakers, financial institutions and other stakeholders. Furthermore, governance ensures that networking efforts are aligned with national tourism objectives, enhancing sectoral competitiveness.
Specific challenges faced by SMTEs are addressed through networking and governance mechanisms. For instance, networking facilitates connections with investors and financial institutions, whereas governance mechanisms promote financial transparency, enhancing trust and access to funding. Collaborative networking with government and private entities can drive infrastructure improvements, with governance ensuring alignment with strategic goals (Kahyarara, 2022). Engagement with policymakers through networks can streamline regulatory processes, supported by governance to ensure compliance and accountability. Networking also provides access to training and mentorship opportunities, whereas governance facilitates knowledge sharing and capacity building within networks.
These findings have several practical implications for SMTEs. Managers should prioritize networking by actively engaging with stakeholders, participating in industry events and leveraging digital platforms to enhance resource access, market reach and collaboration opportunities. Establishing robust governance mechanisms within business networks is essential, as clear norms, decision-making processes and accountability frameworks can maximize the benefits of networking while mitigating risks associated with informal relationships. SMTEs can use their networks to advocate for supportive policies, such as tax reforms and infrastructure development, addressing sectoral challenges. Governance mechanisms can ensure that such advocacy efforts are coordinated and aligned with broader industry objectives. Regular assessment of networking strategies and governance practices can help SMTEs adapt to the dynamic tourism environment, ensuring sustained growth and success.
3.5 Conclusion
This study delves into the complex dynamics between business networking activities, governance mechanisms and the performance of SMTEs within Tanzania. Using a quantitative survey methodology informed by business network theory and institutional theory, the research analyzed data from 383 SMTEs using SEM. The findings reveal a positive relationship between business networking activities and SMTE performance, underscoring the critical importance of robust networking relationships in the tourism sector.
Governance mechanisms are identified as vital mediators, shaping the impact of networking activities on SMTE performance by aligning these activities with the goals and objectives of network participants. The study provides valuable insights, demonstrating that well-designed governance mechanisms can amplify the benefits of networking, resulting in enhanced performance outcomes for SMTEs. This highlights the strategic importance of governance in maximizing the effectiveness of business networks within the tourism industry.
The results suggest that SMTEs should prioritize their networking efforts and establish effective governance structures within their business networks to address common challenges such as limited access to finance, inadequate infrastructure, bureaucratic obstacles and talent shortages. By focusing on these areas, SMTEs can better navigate the complexities of the Tanzanian tourism market, enhance their competitive positioning and foster sustainable growth.
For future research, it is recommended to explore specific governance mechanisms and their direct effects on SMTE performance. In addition, conducting longitudinal studies would provide deeper insights into the long-term impacts of networking and governance on SMTEs. By addressing these areas, SMTEs can strengthen their resilience, enhance operational efficiency and contribute to the broader development of the tourism sector in Tanzania.
3.5.1 Theoretical implications.
The findings of this study offer several significant theoretical implications for the fields of business networking and SMTEs performance. First, the confirmation of a positive relationship between business networking activities and SMTEs performance reinforces the validity of the business network theory proposed by Johanson and Mattsson (1988). This theoretical framework emphasizes the importance of interconnected relationships in facilitating resource exchange, collaboration and ultimately, improved firm performance. By empirically validating this relationship within the context of Tanzanian SMTEs, this study contributes to the ongoing development and refinement of business network theory.
Furthermore, the identification of governance mechanisms as a mediator in the relationship between networking activities and SMTEs performance extends our understanding of institutional theory. The study highlights the pivotal role that institutional structures play in influencing organizational behavior and outcomes. Specifically, the results suggest that effective governance mechanisms are essential in ensuring that networking activities translate into tangible performance benefits for SMTEs. This adds a new dimension to institutional theory by demonstrating that governance structures within business networks are not merely supportive elements but integral components that can enhance the efficacy of networking activities.
In addition, this study bridges a gap in the existing literature by integrating concepts from both business network theory and institutional theory. The findings indicate that the interplay between networking activities and governance mechanisms is crucial for SMTEs’ success. This integrated perspective provides a more comprehensive understanding of how SMTEs can leverage both their relational ties and institutional frameworks to achieve superior performance. Future research can build on this integrated approach to explore other potential mediators and moderators that might influence the relationship between networking activities and organizational performance.
The results also underscore the necessity for future research to explore the specific mechanisms through which governance structures operate within business networks. This could involve examining the roles of different types of governance mechanisms, such as formal contracts, informal norms and decision-making processes, in enhancing the benefits of networking. By delving deeper into these aspects, researchers can develop a more nuanced understanding of how governance practices can be optimized to support SMTEs.
Finally, the study’s findings align with and extend the work of previous scholars who have emphasized the importance of governance in business networks (e.g. Horstmeyer and Wells, 2020). By demonstrating that governance mechanisms fully mediate the relationship between networking activities and SMTEs performance, this study provides empirical evidence that supports the theoretical propositions regarding the critical role of governance in maximizing the value derived from business networks. Future research should continue to explore the dynamic interactions between networking activities, governance mechanisms and organizational performance to further elucidate these complex relationships
3.5.2 Managerial implications.
The findings of this study provide valuable insights for managers and entrepreneurs aiming to improve the performance of SMTEs in Tanzania. First, the positive correlation between networking activities and SMTE performance highlights the strategic importance of fostering strong business relationships within the tourism industry. Managers should prioritize networking by engaging actively with key stakeholders, including customers, suppliers, industry peers and tourism associations. Participating in tourism-related events, conferences and leveraging digital platforms can expand network reach, providing access to essential resources, market insights and partnership opportunities that can enhance competitiveness in the tourism sector.
In addition, the study’s identification of governance mechanisms as a critical mediator suggests that managers should focus on establishing clear rules, norms and decision-making processes within their tourism networks. Effective governance ensures that networking activities align with the goals and values of the SMTE, fostering trust and cooperation among network participants. By promoting transparency, accountability and fair decision-making, SMT managers can maximize the benefits derived from their networking relationships, leading to improved business outcomes.
Furthermore, managers must recognize the dual role of governance mechanisms in both facilitating and regulating networking activities within the tourism sector. This includes setting standards for ethical conduct, managing conflicts and ensuring compliance with legal and regulatory requirements specific to tourism. Implementing effective governance practices helps SMTEs mitigate risks associated with informal networks, such as unreliable commitments or misunderstandings, and establishes a solid foundation for sustainable growth within the tourism industry.
Managers can also use these findings to advocate for policies and initiatives that support SMTEs in building effective business networks and implementing robust governance frameworks. Collaborating with tourism industry associations, government agencies and educational institutions can facilitate access to resources, promote knowledge sharing and strengthen collective advocacy efforts that benefit the entire tourism ecosystem.
Finally, continuous evaluation and adaptation of networking strategies and governance mechanisms are essential for SMTEs to remain agile and responsive to the dynamic tourism market. Regular assessments of network effectiveness, stakeholder feedback and performance metrics will guide managers in refining their networking approaches and enhancing governance practices over time, ensuring sustained growth and success in Tanzania’s tourism industry.
3.5.3 Methodological implications.
This study’s methodological approach using SEM offers significant insights and implications for future research in the field of business networking and SMTEs performance. By using SEM, which is adept at analyzing complex relationships among latent variables, this study provided a robust framework for investigating the interplay between business networking activities, governance mechanisms and SMTEs performance.
First, the application of SEM allowed for a comprehensive examination of multiple variables simultaneously, offering a nuanced understanding of how networking behaviors and governance structures interact to influence SME outcomes. Future researchers in similar domains can benefit from adopting SEM to explore intricate relationships and causal pathways within organizational contexts, thereby advancing theoretical frameworks such as business network theory and institutional theory.
Moreover, the use of a five-point Likert scale for data collection provided detailed insights into respondents’ perceptions, enabling a quantitative assessment of subjective constructs like networking effectiveness and governance quality. This methodological choice enhanced the study’s validity and reliability by capturing diverse viewpoints from a sizable sample of SMTEs.
Furthermore, future studies could enhance the robustness of their findings by using mixed-method approaches, combining quantitative SEM analysis with qualitative data collection methods such as interviews or case studies. Qualitative insights could enrich understanding by exploring contextual factors, organizational dynamics and stakeholder perspectives that influence networking strategies and governance practices in SMTEs.
In addition, longitudinal studies could offer valuable insights into the evolution of networking behaviors and governance mechanisms over time, shedding light on their long-term impact on SMTEs performance and sustainability. By tracking changes in networking patterns, governance structures and business outcomes over extended periods, researchers can uncover trends, causality and adaptation strategies that are crucial for informing strategic decision-making among SMTEs.
In conclusion, the methodological implications of this study highlight the effectiveness of SEM in exploring complex organizational phenomena and suggest avenues for future research to deepen our understanding of how networking and governance dynamics contribute to SME success in diverse economic contexts. By advancing methodological rigor and diversity, researchers can contribute meaningfully to theoretical frameworks and practical insights that support SMTEs growth and resilience.
3.5.4 Policy implications.
Based on the findings of this study conducted among SMTEs in Tanzania, several targeted policy implications emerge to support and enhance the performance and sustainability of SMTEs within the Tanzanian business landscape.
3.5.4.1 Promotion of networking initiatives.
The study underscores the significant positive relationship between business networking activities and the performance of SMTEs. To enhance the growth and competitiveness of the tourism sector, policymakers should prioritize initiatives that facilitate and promote networking opportunities specifically tailored for SMTEs. This can include organizing tourism focused networking events, developing online platforms dedicated to collaboration within the tourism industry and offering financial support to enable SMTEs to participate in trade fairs, tourism expos and international tourism conferences. By fostering a robust networking environment, policymakers can empower SMTEs to access critical resources, gain valuable market insights and form strategic partnerships, all of which are essential for driving sustainable growth in the tourism industry.
3.5.4.2 Enhancement of governance mechanisms.
Governance mechanisms within business networks have been identified as crucial mediators that enhance the effectiveness of networking activities and subsequently improve the performance of SMTEs. To support this, policymakers should encourage SMTEs to adopt best practices in governance, including transparent decision-making processes, clear rules and robust accountability mechanisms. This can be achieved through capacity-building programs specifically designed to educate SMTE owners and managers on effective governance practices relevant to the tourism industry. In addition, policymakers can incentivize SMTEs to join tourism industry associations or business networks that uphold high governance standards and offer peer-learning opportunities. These initiatives will help SMTEs strengthen their operations, build trust within their networks and ultimately drive sustainable growth in the tourism sector.
3.5.5 Limitations and directions for further study.
Despite its contributions, this study has several limitations that should be acknowledged. Exploring networking dynamics and governance mechanisms among a more diverse sample of SMTEs in Tanzania could provide a more comprehensive understanding of these phenomena across different contexts. This would allow researchers to examine how various factors, such as industry type, geographic location and organizational size, influence the effectiveness of networking strategies and governance practices.
Furthermore, while the study identified governance mechanisms as a mediator in the relationship between networking activities and SMTEs performance, the specific mechanisms and processes through which governance operates remain underexplored. Future research could delve deeper into these mechanisms, drawing from alternative theoretical perspectives such as agency theory or resource dependence theory to enrich the analysis. By examining the intricacies of governance structures within business networks, researchers can uncover the mechanisms that facilitate effective decision-making, coordination and value creation among network participants.
Finally, longitudinal studies could provide valuable insights into the long-term effects of networking activities and governance mechanisms on SMTE performance, offering a deeper understanding of these dynamics over time. By tracking networking efforts, governance practices and performance outcomes, researchers can identify trends, patterns and causal relationships not visible in cross-sectional studies. In addition, developing a sampling frame and implementing stratified random sampling would help mitigate potential biases associated with convenience sampling, ensuring a more representative sample and enhancing the validity of the findings. Such studies could offer crucial insights into the sustainability and adaptability of networking strategies and governance structures in supporting SMTE growth in Tanzania.
Acknowledgements
The author would like to extend his sincere gratitude to the University of Dodoma (UDOM) for their invaluable facilitation and support throughout this research. The time, resources and logistical assistance provided by UDOM were instrumental in the successful completion of this study.
Finally, the author would like to acknowledge the constructive feedback and guidance provided by his colleagues and peers, which greatly enhanced the quality of this work. The author thank for their unwavering support and encouragement.
Research ethics: This study adheres to ethical research standards and was conducted following the principles of integrity, confidentiality and voluntary participation. The research permit was granted by the Research Ethics Board of the UDOM, ensuring that all ethical considerations were addressed before the commencement of the study.
Participants were informed of the purpose of the research, assured of confidentiality and provided with the option to withdraw at any stage without repercussions. Their consent was obtained voluntarily, and all data collected were securely stored and used solely for the purposes of this study.
The research was conducted in accordance with the guidelines set forth by UDOM’s Research Ethics Board to ensure compliance with both institutional and national ethical standards.
Ethical approval and informed consent statements: This study did not involve human subjects requiring formal ethics approval. However, confidentiality and anonymity of the participants were ensured, and all collected data were treated with utmost secrecy. An informed consent form was obtained from all participants, ensuring they were fully aware of the objectives, benefits and any potential risks associated with the study. Participants' consent regarding their willingness to participate in the research was explicitly sought and obtained.
Funding details: This research received no specific grant from any funding agency, commercial or not-for-profit sectors.
Disclosure statement: The author declare no conflict of interest.
Author contributions statement: Dr Buzohera was involved in all process of this research including conceptualization, methodology, writing – original draft preparation; data curation, analysis, writing – review and editing with the help of AI; supervision, project administration, then review and submissions.
Data availability statement: The data supporting this study’s findings are available upon reasonable request from the corresponding author.
Figures
Measurement of variables
Variable | Scale | Measurement |
---|---|---|
Business networking (independent variable) | Five-point Likert scale | Time spent by owners/managers in the past year on building connections with relevant actors (Anwar and Ali Shah, 2020; Xu et al., 2018) |
SMTEs performance (dependent variable) | Five-point Likert scale | Financial and nonfinancial performance measures, Ismail and Mohamad (2022); Kantur, D. (2016) |
Governance mechanisms (mediating variable) | Five-point Likert scale | Collaborative, procedures and mechanisms for decision-making within the business network Meyer, Greenwood, and Oliver (2017); Cousins and Menguc (2006) |
Norms, rules and decision guidelines governing the behavior of network participants, Meyer et al. (2017); Alvarez et al. (2010) |
Source: Author’s compilation
Confirmatory factor analysis (CFA) results, composite reliability (CR) and average variance extracted (AVE) for study constructs
Constructs | Codes | CFA-Estimates | CR | AVE |
---|---|---|---|---|
Business networking (BN) | BN1 | 0.783 | 0.834 | 0.629 |
BN2 | 0.898 | |||
BN3 | 0.685 | |||
Governance mechanisms (GM) | GM1 | 0.692 | 0.876 | 0.705 |
GM2 | 0.917 | |||
GM3 | 0.891 | |||
SMTEs performance (SMTEsP) | PF1 | 0.861 | 0.919 | 0.739 |
PF2 | 0.904 | |||
PF3 | 0.861 | |||
PF4 | 0.811 |
A composite reliability of 0.70 or more is recommended (Hair,1997); Fornell and Larcker (1981) recommended an AVE greater than 0.5
Source: Author’s compilation
Frequency and percentage of respondents for each business type within the sample SMTEs
Characteristic | Category | Frequency | % |
---|---|---|---|
Managerial position | Salaried managers | 275 | 71.8 |
Owner-managers | 108 | 28.2 | |
Tourism sector | Restaurants and services | 115 | 30.0 |
Tour operators and travel agencies | 106 | 27.7 | |
Accommodation providers | 80 | 20.9 | |
Transportation providers | 82 | 21.4 |
Source: Author’s compilation
Summary of model fit indices for the measurement model in structural equation modeling (SEM)
Model fit indices | Value | Recommended threshold |
Interpretation |
---|---|---|---|
Chi-square (CMIN/DF) | 2.209 | ≤3 | Acceptable fit (Hair et al., 2017) |
Root mean square error of approximation (RMSEA) | 0.056 | ≤0.08 | Good fit |
PCLOSE | 0.262 | >0.05 | Indicates good fit for RMSEA |
Standardized root mean square residual (SRMR) | 0.0451 | ≤0.08 | Good fit |
Comparative fit index (CFI) | 0.985 | ≥0.9 | Excellent fit |
Normed fit index (NFI) | 0.973 | ≥0.9 | Strong model fit |
Incremental fit index (IFI) | 0.985 | ≥0.9 | Excellent fit |
Tucker–Lewis index (TLI) | 0.979 | ≥0.9 | Robust fit to data |
Source: Author’s compilation
Structural model results for hypothesis testing
Direction of the relationship | Hypothesis | Estimate | SE | CR | p | Decision |
---|---|---|---|---|---|---|
SMTEsP ← (direct) BN | H1 | 0.474 | 0.074 | 6.438 | *** | Significant |
GM ← BN | H2 | 0.705 | 0.045 | 15.611 | *** | Significant |
SMTEsP ← (mediation) BN-GM | H3 | 0.316 | 0.145 | 2.174 | 0.030 | Significant |
SMTEsP ← (direct after mediation) BN | H1* | 0.112 | 0.117 | 0.953 | 0.341 | Not significant |
Source: Author’s compilation
Path differences in the relationships between business networking (BN), governance mechanisms (GM) and performance (PF) across SMTE subsector comparisons
Relationship | Accommodation – Restaurants and services (β, p-value) |
Accommodation – Tour operator and travel agency (β, p-value) |
Accommodation – Transport providers (β, p-value) |
Restaurants and services – Tour operator and travel agency (β, p-value) |
Restaurants and services – Transport providers (β, p-value) |
Tour operator and travel agency – Transport providers (β, p-value) |
---|---|---|---|---|---|---|
BN → GM | −0.014 (0.896) | −0.005 (0.991) | −0.021 (0.823) | 0.009 (0.882) | −0.007 (0.898) | −0.016 (0.807) |
BN → PF | 0.080 (0.724) | 0.361 (0.171) | 0.113 (0.647) | 0.281 (0.181) | 0.033 (0.845) | −0.248 (0.301) |
GM → PF | −0.170 (0.521) | −0.385 (0.146) | −0.292 (0.297) | −0.215 (0.277) | −0.122 (0.547) | 0.093 (0.694) |
BN → GM → PF | −0.129 (0.517) | −0.289 (0.149) | −0.224 (0.285) | −0.160 (0.291) | −0.095 (0.529) | 0.065 (0.722) |
Source: Author’s compilation
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Further reading
Malipula, M.M. (2023), “SMTEs sustainability through entrepreneurship training in Tanzania”, Journal of Enterprise and Development (JED), Vol. 5 No. 3, pp. 384-397.
Dutot, V, &. and Bergeron, F. (2016), “From strategic orientation to social media orientation: Improving SMTEs’ performance on social media”, Journal of Small Business and Enterprise Development, Vol. 23 No. 4, pp. 1165-1190.
Frank, M. (2023), “Influencing attributes on revenue growth: an empirical analysis from SMTEs in Tanzania”, Journal of Accounting, Finance and Auditing Studies, doi: 10.32602/jafas.2023.009.
Gassiah, N. and Kikula, J. (2022), “Challenges small and medium enterprises (SMEs) face in acquiring loans from commercial banks in Tanzania”, African Journal of Business Management, Vol. 16 No. 4, pp. 74-81.
Liu, J., Wang, Y. and Chang, L. (2023), “How do short videos influence users’ tourism intention? A study of key factors”, Frontiers in Psychology, Frontiers, Vol. 13, p. 1036570.
Sarstedt, M., Ringle, C.M. and Hair, J.F. (2021), “Partial least squares structural equation modeling”, Handbook of Market Research, pp. 587-632. Springer International Publishing, Cham.
Sok, P., Snell, L., Lee, W.J. and Sok, K.M. (2017), “Linking entrepreneurial orientation and small service firm performance through marketing resources and marketing capability: a moderated mediation model”, Journal of Service Theory and Practice, Vol. 27 No. 1, pp. 231-249.
Corresponding author
About the author
Mohamed Issa Buzohera is a respected expert and academician in the field of business management and entrepreneurship. He is affiliated with the Department of Business Administration and Management at the University of Dodoma. With a focus on advancing knowledge in these areas, Mohamed's research contributes significantly to understanding the intricacies of SMTEs performance, business networking, and governance mechanisms.