What drives productivity in Tanzanian manufacturing firms: technology or business environment?

Using cross-sectional firm-level data, this paper examines the determinants of productivity among manufacturing firms in Tanzania. In particular, it seeks to evaluate the relative importance of technological advances and the business environment in which firms operate in affecting productivity. Of the technological variables, R&D as well as product and process innovation, licensing of technology, and training of employees fail to have any impact; only foreign ownership, ISO certification and higher education of the management appear to affect productivity. Some important influences from the broader business environment, however, appear to affect productivity and are robust to different specifications of the model. Credit constraints, administrative regulatory burdens and a lack of business support services depress productivity; membership of a business association is associated with higher productivity.