Influence of Foreign Sales Subsidiaries on the Growth of Sme’s Exporting Cut-Flowers in Arusha Region.

Abstract

International trade is associated with growth of SMEs participating in export trade. However, despite taking part in the international trade, SMEs exporting cut-flowers in Tanzania are marked by slow growth and small number irrespective of their significance in foreign exchange earnings and economy. Uppsala model was applied in this study to determine the influence of foreign sales subsidiaries on the growth of SMe‟s exporting cut-flowers in Arusha. This study employed descriptive cross-sectional design and mixed-methods research approach. Self-administered semi-structured questionnaires were used to survey 98 participants from 14 firms exporting cut- flowers and 14 key informants which were purposively selected. Descriptive and inferential statistics were used to analyze quantitative data through MS Excel and SPSS version 26 and content analysis were used to analyze qualitative data. It was found that foreign sales subsidiaries enable sharing of export responsibilities with the parent company; lead to better resources like usage of technology; enable parent company to access local financial benefits; and build business networks with international businesses (p value ˂ 0.05). Also, the respondents agreed that foreign sales subsidiaries facilitate the sale of products by the parent firm in the foreign market; enable fast entry to new foreign markets; increase access to new market knowledge and experience; increase capacity of the parent export firm; and decrease the costs and risks of opening office in a foreign country. The study conclude that foreign sales subsidiaries have positive effect on the growth of SMEs. In contrast to previous studies, the growth of cut-flower exporting SMEs was found to be high in terms of productivity, geographic diversification, profitability, and product quality; however, SMEs‟ competitive advantage was found to be low.