Absorptive Capacity of Micro, Small and Medium Enterprises in Accessing and Utilising Business Development Services in Arusha City and Moshi Municipality, Tanzania

Micro, Small and Medium Enterprises (MSMEs) absorptive capacity to acquire and use Business Development Services (BDS) is critical for their survival, growth and ability to compete in the market. The objective of this paper was to examine MSMEs' absorptive capacity to access and use BDS in Moshi Municipality and Arusha City. A total of 254 MSMEs were sampled using random sampling for the study. A Cross-section design was used for this study. Respondents were sampled using simple random sampling. Data were collected using a structured questionnaire, focus group discussions, and observation. Content analysis was used to analyse qualitative data, and quantitative data were analysed using the Statistical Package for Social Sciences (SPSS). Results indicated that most MSMEs were aware of available Business Development Service Providers (BDSPs) and had used their services. The main sources of BDS for MSMEs were private business development providers. MSMEs have various potential in terms of human and financial capital to access and use the BDS provided by available BDS providers. Medium-sized enterprises showed high knowledge-sharing potential, mostly supported by high capacity of human and financial capital, while micro-enterprises had low potential for applying new knowledge, which was influenced by the low level of financial and human capital. The paper recommends that MSMEs should develop internal capacities through training and networking activities to acquire the capacity to identify new knowledge and productive BDS. The government should also provide subsidies to private service providers to invest and bring appropriate technology to MSMEs. Policies with minimum local content should be enacted to ensure that BDS providers provide services to micro and small enterprises. Furthermore, efforts should be made by BDS providers to effectively make use of media, formal and informal organisations, and the Ministry of Industry and Trade in raising awareness about BDS providers’ functions and expertise in business development.