Influence of Business Characteristics on Selection of Investment Evaluation Techniques: The Case of Tanzanian SMEs

Abstract

This study was conducted in two phases; first as a survey and second as a case study. The study used a cross-sectional survey design to explain the business characteristics influencing the selection of investment evaluation techniques among Tanzanian SMEs. Purposive sampling technique was used to collect data to a sample of 301 SMEs drawn from SIDO in Dar es Salaam and Dodoma regions. Data were collected though questionnaires and transformed into suitable format for analysis using statistical packages for the survey, while for the case study interviews were used. Statistical techniques used in this study were descriptive (frequency distributions) and inferential statistics (multivariate analysis) which were used to determine whether or not there is a relationship between business characteristics and selection of investment evaluation techniques.  Results of this study shows that, sales growth, industry of business, level of education and finance education of owners, were the business characteristics that influence the selection of investment evaluation techniques.

Theoretical and practical contributions in the area of investment decisions for SMEs in Tanzania are made based on the findings of the study. On theoretical contributions, the study provided a better understanding on small business characteristics and how they influenced the selection of investment evaluation techniques. On practical contributions, owners should maintain high sales growth; improve education background by attending short courses on financial management, because these two characteristics significantly affect the selection of investment evaluation techniques.