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Performance Measurement Systems in Tanzanian Tourism SMEs:
An Integrated Mixed-Methods Study
Habib Ussi Hamad, Siri Roland Xavier
University Tun Abdul Razak
DOI: https://dx.doi.org/10.47772/IJRISS.2025.914MG00186
Received: 04 October 2025; Accepted: 10 October 2025; Published: 07 November 2025
ABSTRACT
This research examines how performance measurement systems are utilized by small and medium-sized
enterprises (SMEs) in Tanzania’s tourism sector, particularly within the accommodation subsector. The study
focused on three objectives: 1) analyzing the impact of factors such as environmental uncertainty, ethnic
ownership, business size, and strategic orientation on the use of performance measurement systems; 2)
investigating the methods these SMEs use to implement these systems; and 3) exploring how these systems
influence key organizational capabilities like resource teaming, strong routines, entrepreneurial spirit, and
innovativeness as well as overall performance. A mixed-methods approach was employed, utilising semi-
structured interviews and surveys, with analysis conducted using NVivo software and Structural Equation
Modelling (PLS method). The findings showed that the contextual factors significantly influenced the adoption
of performance measurement systems and their relationship with organizational performance through enhanced
capabilities. This research provides valuable insights to the management accounting literature, particularly for
SMEs in developing nations, and offers practical recommendations for business management and policymaking
to support SME growth in the tourism sector.
Keywords: Performance measurement systems; SMEs; Business management
INTRODUCTION
Emerging economies are increasingly acknowledging small and medium enterprises (SMEs) as crucial
contributors to social and economic progress. The SME sector is essential for economic development, job
creation, and poverty reduction (Israel, 2025). In Tanzania, SMEs make a notable contribution to the economy,
accounting for around 35% of the Gross Domestic Product (GDP) and employing more than 20% of the labour
force. They play a crucial role in various sectors, including agriculture, manufacturing, trade, and services, by
fostering economic growth and reducing poverty through initiatives that support self-employment and
microfinance.
Nonetheless, Tanzanian SMEs encounter obstacles, including limited access to financing, inadequate technical
skills, and constrained market opportunities, which impede their growth potential (Lambin & Nyyssölä, 2024).
With over 3 million enterprises, SMEs are crucial, representing approximately 90% of businesses in Tanzania
and employing over 5 million individuals. The agricultural sector is a key area for SMEs, particularly with female
entrepreneurs managing more than half of these enterprises. However, 66% of micro and small enterprises
generate annual revenues below USD 2,000, reflecting their difficulty in scaling up. Challenges such as high
interest rates, inadequate collateral, short repayment periods, and insufficient transparency regarding loan
information further complicate access to essential funding.
The Tanzanian government recognises the crucial role of SMEs in driving economic development and has
implemented several policies to support this sector. The SME Development Policy, which is part of Tanzania’s
Development Vision 2025, focuses on fostering SME growth as a means of economic progress and poverty
alleviation. The formation of the Small Industries Development Organisation (SIDO) in 1973 has been
instrumental in delivering services like training and hire purchase programs. The government has also partnered
with commercial banks to provide loans to Micro, Small, and Medium Entrepreneurs, addressing funding
INTERNATIONAL JOURNAL OF RESEARCH AND INNOVATION IN SOCIAL SCIENCE (IJRISS)
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shortages. International collaborations are significant, with the European Union offering grants and the European
Investment Bank providing loans to Tanzanian banks for SME support. There is a particular emphasis on startups
and enterprises run by youth and women, with new regulations from the Capital Markets and Securities Authority
aimed at enhancing access to venture capital.
Moreover, the government is focusing on sectors such as the blue economy in Zanzibar. Recent statistics indicate
a substantial rise in tourism, with 409,082 visitors recorded in the first quarter of 2023, exceeding previous
records and suggesting a recovery following the COVID-19 pandemic.
According to the latest figures on international tourists visiting Tanzania, Kenya topped the list with 44,588
arrivals, followed by France (31,636), Italy (25,145), and Burundi (23,829). The USA contributed 23,274
tourists, while Germany, Poland, and the UK brought in 21,755, 15,203, and 14,652 visitors, respectively.
Rwanda accounted for 11,870 arrivals (Buzohera, 2025). A press release from the National Bureau of Statistics
(NBS) for January and February 2023 noted that this influx of visitors was spurred by eased lockdown
restrictions and Tanzania’s successful marketing of its tourist attractions. Most visitors came for leisure purposes,
underscoring the country’s appeal as a vacation destination. (https://www.tanzaniainvest.com/tourism/tourist-
arrivals-q1-2023)
Research Objective
This research aims to address gaps in the existing literature on tourism SMEs in Tanzania, a country with notable
growth potential in this sector. It is based on contingency theory, examining how four variables, environmental
uncertainty, ownership ethnicity, size, and strategy, impact the adoption of performance management systems.
The study advances understanding of management accounting practices by investigating how SMEs in
Tanzania's accommodation sector use these systems to enhance their operations. It also evaluates how these
systems influence four key organisational capabilities: resource teaming, routines, entrepreneurship, and
innovation, as well as overall performance. The primary objectives are to assess how these factors influence the
adoption of performance measurement systems by tourism SMEs in Tanzania, to understand how these
businesses implement such systems, and to explore their impact on organisational capabilities and performance.
LITERATURE REVIEW
The body of literature focusing on management control and performance management systems underscores their
essential contribution to fostering effective organisational governance. Numerous studies reveal that these
systems serve as indispensable mechanisms that empower organisations to not only articulate their strategic
objectives but also to systematically pursue, track, and evaluate their progress toward these goals. This is
particularly critical in dynamic environments that are subject to rapid change and uncertainty, where the ability
to adapt and realign strategies becomes increasingly vital. Notable researchers, such as Simons (2000),
emphasise the transformative impact these systems can have on organisational success and accountability.
Performance management systems serve several fundamental purposes that are essential for organisational
success. First and foremost, they focus on measuring business performance. This involves a rigorous process of
tracking and evaluating progress toward performance targets, ensuring that organisational goals are effectively
met. Moreover, these systems play a crucial role in integrating strategic management philosophies within an
organisation. They aid in the development, formulation, and execution of strategies, ensuring that daily
operations align with broader objectives.
Alongside strategic integration, performance management systems support communication. They improve both
internal and external interactions, encouraging constructive engagement within the organisation as well as with
external stakeholders. This also enables benchmarking against various performance criteria. Furthermore,
performance management systems greatly influence employee behaviour. They establish and oversee reward
and compensation structures, effectively motivating individuals to align their performance with organisational
expectations. Lastly, these systems foster a culture of learning and continuous improvement. Through systematic
feedback processes, they aim to refine and enhance future performance outcomes, creating an environment where
learning is valued and ongoing development is pursued.
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Purbey et al. (2007) emphasise that performance management systems are essential organisational processes that
help evaluate progress towards objectives, recognise both strengths and weaknesses, and support continuous
improvements in performance. They allow managers to strategically balance key factors such as growth, control,
and performance (Simons, 2000). Consequently, scholars from various fields, including accounting, business
strategy, and operations management, have undertaken extensive research on these systems (Spanò & Zagaria,
2022).
Neely et al. (2005) delineate the distinctions between performance measures, performance measurement, and
performance management systems: a performance measure quantifies the efficiency and effectiveness of an
action, performance measurement is the process of quantifying these attributes, and a performance management
system encompasses the metrics employed in this evaluation. This study aims to explore how these systems
support management in the essential areas of planning, control, and decision-making, particularly within the
services industry in Tanzania, with a specific emphasis on small and medium-sized enterprises (SMEs) in the
tourism sector.
Use of performance management systems in SMEs
Despite the recognised significance of small and medium-sized enterprises (SMEs) in the global economy, the
intricacies of their management control structures and performance management systems remain poorly
understood. A substantial amount of existing research has predominantly centered on manufacturing industries,
leaving a considerable gap in studies focused on service-oriented SMEs (Watts et al, 2009). While performance
management systems have the potential to facilitate managerial growth and strategic development within SMEs
(Garengo et al., 2005), there is a striking underutilization of these systems and a lack of investigation into the
underlying reasons for this phenomenon (Garengo & Bititci, 2007). Formal management controls are critically
important for the survival of small firms, as their long-term viability often hinges on the effectiveness of
performance management practices (Davila & Oyon, 2009).
Current literature suggests that an optimal approach would involve a hybridisation of formal and informal control
systems, integrating both non-financial and financial performance measures. However, in practice, these systems
often operate at suboptimal levels, failing to deliver their full potential benefits (Sousa et al., 2006). Research
conducted on French family-owned SMEs by Oriot et al. (2010) highlighted the effective use of strategic
scorecards, which can guide organizations in assessing their performance. Conversely, Sousa et al. (2006)
pinpointed a critical gap between the acknowledgment of the importance of performance management systems
and their actual implementation within English SMEs. This is echoed in the experience of Indian SMEs, which,
despite recognising the necessity of efficient systems, struggle significantly with their operationalization
(Sharma et al., 2005). Moreover, the existing lack of empirical studies on the evolution of performance
management practices in SMEs, as compared to larger firms, exacerbates this underutilization issue (Spanò &
Zagaria, 2022; Varma, 2023).
The literature also reveals a notable disparity in the application and development of performance management
systems between developing and developed nations (Andersen et al., 2006; Georgise et al., 2013). For many
developing countries, challenges such as limited research findings, lack of specialized expertise, cultural
disparities, and insufficient technological infrastructure further compound the difficulties they face. Georgise et
al. (2013) specifically underscore the dearth of studies within regions like Africa, a sentiment mirrored in
research findings from Malaysia (Amir, 2011) and Indian SMEs (Sharma & Bhagwat, 2007). Alarmingly, there
is a complete absence of studies examining performance management systems within the tourism sector in
developing countries, particularly in nations like Tanzania.
The adaptation of management frameworks from developed countries poses additional challenges, primarily due
to the complexities involved in selecting relevant key performance indicators that resonate with the unique
cultural contexts of developing nations (Georgise et al., 2013). While there is a gradual increase in research on
performance management across diverse contexts (Nepoti et al., 2024), a persistent deficiency in IT
infrastructure continues to complicate data collection and analysis efforts (Andersen et al., 2006). This study
aims to serve as a crucial bridge between theoretical constructs and practical applications of performance
management systems within tourism-focused SMEs in developing countries, seeking to enhance their
operational efficiency and competitive advantage.
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Application of performance management systems in small and medium-sized enterprises in the tourism
sector.
As hospitality and tourism industries continue to rise in prominence within the global economy, the demand for
comprehensive research in these dynamic fields is becoming increasingly critical Sharma, 2002). The intense
competition on an international scale (Altin, 2018) has compelled organisations to finely hone their services to
cater to the evolving needs of sophisticated travellers who seek unique and memorable experiences. As a result,
the ongoing monitoring and enhancement of service quality and operational efficiency have transformed into
indispensable priorities for organisations striving to maintain their competitive edge (Altin, 2018). While there
has been substantial academic exploration into performance management systems within the tourism sector,
particularly among large hotels, there remains a significant oversight regarding small and medium-sized
enterprises (SMEs), especially those situated in developing countries. The majority of existing research has
predominantly focused on developed regions such as the United States and Europe, rendering a notable absence
of insights from emerging markets a gap that necessitates further investigation.
Research on performance management in tourism SMEs has the potential to yield valuable insights. Taking as
an example the study conducted by Bergin-Seers and Jagos (2007) on successful small motels in Australia, they
revealed a balanced management approach that incorporated both financial and non-financial indicators. Their
findings highlighted that a select few critical performance measures served as guiding frameworks for
management activities, allowing owner-managers to proactively monitor their businesses and respond swiftly to
emerging challenges. Furthermore, their research indicated that the most effective practices often emerged from
a combination of experiential learning and formal training, underscoring the importance of continuous
development in a competitive landscape (Spanò & Zagaria, 2022; Varma, 2023).
Travel Sector and Environmental Instability
Environmental uncertainty has a significant impact on the performance of service-oriented firms, particularly in
the hotel sector (Suleiman, 2023). Key factors include competition, government regulations, political and
economic stability, global economic fluctuations, and natural disasters, all of which notably affect the tourism
industry. The hotel sector faces intense competition, making reliable performance data essential for effective
decision-making (Suleiman, 2023; Buzohera, 2025). This study focuses on the environmental uncertainties faced
by tourism small- and medium-sized enterprises (SMEs) in Tanzania. It examines factors such as competition,
customer demands, political stability, economic conditions, government regulations, tourism policies, global
trends, and natural disasters. Addressing these uncertainties can help SMEs improve their performance.
Ownership type affects how Owner-Managers implement performance management systems, particularly in
family-owned versus non-family firms. Many tourism SMEs, particularly in Glasgow and rural Finland, are
family-owned and rely on informal and social controls (Reijonen & Komppula, 2007). The impact of ethnicity
on ownership has been less explored, especially in Tanzania's multicultural society. Management styles are also
influenced by cultural backgrounds, defined by shared values and beliefs (Hofstede, 2001). Critical cultural
dimensions include power distance, individualism vs. collectivism, masculinity vs. femininity, and uncertainty
avoidance.
In Tanzania, which has distinct cultures such as Bantu, Nilotic, and Swahili, ethnicity is vital in cross-cultural
accounting research. Studies show that managers from different cultural backgrounds respond differently to
management practices (Tsui, 2001; Etemadi et al., 2009). For example, Chinese managers, who have a
collectivist background, engage differently in budget participation than their Western counterparts. This suggests
that management accounting theories from Western economies may not apply universally, which may also affect
the use of performance management systems among Tanzania’s ethnic groups.
Research has examined the link between culture and management control systems, focusing on how national
culture influences control system design across countries (Tsui, 2001). Additionally, the impact of
organisational culture on management control and performance systems has been explored. Differences in
practices among firms from various cultural backgrounds underscore the need for further research on the impact
of owner-manager ethnicity on management control systems (Hosen et al., 2011). Critiques suggest that national
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culture should be examined more deeply within multicultural societies, advocating for a focus on organisational
and within-national cultural differences. Silva et al. (2024) emphasise that multiculturalism is crucial in
international accounting research and the interpretation of International Financial Reporting Standards (IFRS)
(Ismail, 2024). This study examines the impact of ethnic ownership on the use of performance management
systems among tourism SMEs in Tanzania. It aims to clarify the role of "ownership by ethnicity" in the tourism
industry’s performance management practices.
The Theories
Contingency theory
The contingency theory of management accounting posits that there is no one-size-fits-all approach to
management control systems; the choice of control techniques depends on the specific circumstances of an
organization (Otley, 1999). It highlights how accounting systems should be tailored to certain defined conditions,
indicating that effective designs are context-dependent (Otley, 1980). Various key contextual variables have
been studied, including external environments, technology, organisational structure, size, strategy, and national
culture (Chenhall, 2003; Krishnan et al., 2022).
Research generally supports a correlation between these variables and management control systems (Chenhall,
2003). Chenhall and Chapman (2006) emphasize that seeking a good fit is a dynamic process. This study aims
to add to the contingency literature by exploring how contextual variables relate to the use of performance
management systems in SMEs within the Tanzanian tourism sector.
The levers of control Framework
Simons (1995) identifies four types of management control systems: belief systems, boundary systems,
diagnostic control systems, and interactive control systems. Belief systems convey core values and guide
employee behaviour, while boundary systems define acceptable behaviours and limit waste through explicit rules
(Simons, 1995).
Diagnostic control systems focus on achieving goals by monitoring outcomes and correcting deviations using
financial metrics (Barros & Ferreira, 2022; Kuruppu et al., 2024). They motivate managers to meet targets,
although they may constrain behaviour (Emsley, 2001). Effective design of these systems requires an
understanding of key performance variables (Simons, 1995).
Interactive control systems engage managers in subordinates’ decision-making and foster innovation by
balancing creative efforts with predictable outcomes (Davila et al., 2009; Barros & Ferreira, 2022). Key
characteristics include a focus on important agendas, regular management engagement, face-to-face discussions,
and facilitating debates around plans. Though time-consuming and costly, interactive systems help share
information and reduce knowledge gaps (Baird et al., 2019).
This review emphasises the diagnostic and interactive use of controls, particularly regarding performance
management systems in Tanzanian SMEs within the tourism sector. The next section will examine the impact
of these systems on capabilities and organisational performance in relation to resource-based theory.
Resource-Based Theory
Resource-based theory suggests that a firm’s sustained competitive advantage arises from its valuable, rare,
inimitable, and non-substitutable resources (Barney, 1991; Barney et al., 2001). These resources include all
assets, capabilities, and knowledge essential for developing effective strategies (Barney, 1991; Daft, 1983).
Henri (2006a) states that competitiveness derives from distinctive resources and capabilities, with some theorists
arguing that a unique resource bundle forms the basis for sustained competitive advantage (Conner & Prahalad,
1996; Mehmood et al., 2023; Agrawal et al., 2024; Duarte Alonso et al., 2025).
Grant (1991) differentiates between resource inputs into production (e.g., equipment, skills) and capabilities,
which are the capacity to utilise these resources effectively. While resources contribute to capabilities, it is the
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capabilities, such as innovation and entrepreneurship, that drive competitive advantage (Duarte Alonso et al.,
2025). This study focuses on two capabilities from Henri’s (2006a) research: innovativeness and
entrepreneurship, particularly relevant to the Tanzanian SME tourism sector. Due to the narrow customer base
of SME tourism firms, capabilities such as market orientation and organisational learning are less applicable, as
they are often limited by the owner-manager’s decision-making role (Dewangan et al., 2024). In contrast,
innovativeness and entrepreneurship emerge as crucial for competitive advantage.
Additionally, the study introduces two more capabilities: resource teaming and organisational routines. The
Owner-Manager’s ability to mobilise and manage resources through established processes is vital for business
performance. Each of the four capabilities will be explored in detail, with justifications for their relevance in this
research context.
Research hypotheses
H1a: Tourism SMEs in Tanzania experiencing high environmental uncertainty tend to employ performance
management systems interactively instead of diagnostically.
H1b: Tourism SMEs in Tanzania facing low environmental uncertainty are more inclined to use performance
management systems diagnostically rather than interactively.
H2a: Indigenous-owned tourism SME firms tend to utilise performance management systems in a diagnostic
manner rather than interactively.
H2b: Tourism SME firms owned by Indo-Tanzanian and European individuals are more inclined to use
performance management systems interactively rather than diagnostically.
H3a: Small Tanzanian tourism firms tend to utilise performance management systems in an interactive manner
rather than a diagnostic one.
H3b: Medium-sized Tanzanian tourism firms are more likely to use performance management systems
diagnostically instead of interactively.
H4a: Tanzanian tourism SMEs employing a cost leadership strategy tend to utilise performance management
systems in a diagnostic manner rather than interactively.
H4b: Tanzanian tourism SMEs adopting a differentiation strategy are likely to employ performance management
systems interactively instead of diagnostically.
H5: The diagnostic application of performance management systems is likely to hinder the utilisation of SME
capabilities related to resource teaming, organisational routines, entrepreneurship, and innovation.
H6: The interactive application of performance management systems is expected to enhance the deployment of
SME capabilities in resource collaboration, organisational routines, entrepreneurship, and innovation.
RESEARCH METHODS
The research utilised a sequential mixed-methods approach, effectively combining both qualitative and
quantitative methodologies to comprehensively gather and analyse data related to tourism accommodation in
Tanzania.
The research unfolded in two distinct phases:
1. Qualitative Phase:
The initial phase employed a multiple case study design that centered on three unique tourism accommodation
businesses in Tanzania.
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Data Collection: The primary method of data collection involved conducting in-depth, semi-structured
interviews with owner-managers and key members of the management teams at each selected establishment.
This approach enabled the researcher to delve deep into their insights, experiences, and operational challenges
that characterize the Tanzanian tourism landscape.
Data Analysis: The qualitative data garnered from interviews were meticulously analyzed using thematic
analysis, facilitated by NVivo software. This enabled the identification of recurring themes and patterns within
the data, offering rich narratives and insights into the operations of each business.
2. Quantitative Phase:
Building on the findings of the qualitative analysis, the second phase involved disseminating a comprehensive
survey to capture the broader population of tourism SMEs within Tanzania's accommodation sector.
Data Collection: The survey was primarily distributed online to ensure accessibility and convenience; however,
a postal mail option was made available for participants lacking internet access. Ultimately, a total of 65 usable
responses were collected, providing a robust dataset for analysis.
Data Analysis: The quantitative data were scrutinised using IBM SPSS software for preliminary assessments,
including tests for non-response bias. For the main hypotheses testing, Partial Least Squares Structural Equation
Modelling (PLS-SEM) was employed, allowing for rigorous examination of the relationships among variables.
Sample Assessment and Collection:
The researcher implemented a multi-stage process to both gather and assess the sample for the qualitative and
quantitative phases of the study.
Quantitative Survey Sample:
1. Initial Gathering: The process commenced with the creation of an extensive database that included 422 tourism
accommodation operators across Tanzania. This comprehensive master list was developed by aggregating
information from various credible sources, including public tourism websites such as the Tanzania Tourist
Board, official government records, and valuable insights obtained through informal networking with industry
officials and consultants.
2. Assessment and Refinement: The initial pool of 422 businesses underwent a systematic filtering process to
ensure alignment with the study’s focus on Small and Medium Enterprises (SMEs).
First, larger establishments with over 100 rooms were excluded, reducing the list to 397 SMEs. Additionally,
the three firms selected for the qualitative case studies were removed from the sample, resulting in a refined
frame of 394 businesses. A crucial verification step followed, where a research assistant contacted all 394
businesses by phone to confirm their operational status and update contact details. This step revealed that 149
businesses were unreachable. Consequently, the final verified survey sample comprised 245 businesses, ensuring
that the survey targeted operational entities.
Qualitative Case Study Sample:
For the qualitative phase, three case study businesses were chosen based on strategic criteria to facilitate a
thorough and relevant analysis:
Business Size: A careful mix of small and medium-sized enterprises was ensured, providing a holistic view of
the sector.
Operational History: Each selected business had to demonstrate a robust operational history, being in existence
for a minimum of five years. This criterion was vital to capture experienced insights.
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Existing Systems: It was essential that each business had a performance measurement system in place, indicating
a structured approach to operational efficiency and effectiveness.
Ownership by Ethnicity: The selected businesses represented the three major ethnic groups prevalent in the
Tanzanian business landscape: Indigenous Tanzanian, Indo-Tanzanian, and European, thereby enriching the
study’s cultural perspective.
Through this carefully structured approach, the research aimed to present a comprehensive picture of the tourism
accommodation sector in Tanzania, highlighting the interplay of various factors that impact SMEs in this vital
industry.
RESULTS
Below is a summary of the thesis results organised by the study’s three main research objectives.
Summary of Thesis Results
The dissertation’s results can be understood in three stages: 1) how external and internal factors influence the
use of Performance Measurement Systems (PMSs); 2) how PMSs are then used to develop organisational
capabilities; and 3) how those capabilities ultimately affect overall organisational performance.
Part 1: Factors Influencing the Use of Performance Measurement Systems (PMS)
This section addresses the first research objective, which examined how four key contingent factors,
environmental uncertainty, ownership by ethnicity, size, and strategy, influenced whether firms used PMSs in a
diagnostic (monitoring) or interactive (dialogue-focused) manner.
Hypothesis
Group
Research Hypothesis
Result
Explanation of Results
H1:
Environmental
Uncertainty
Firms in uncertain
environments will use
PMSs more
interactively, while
firms in stable
environments will use
them more
diagnostically.
Rejected
The quantitative analysis found no significant relationship
between perceived environmental uncertainty and the style
of PMS use. The qualitative data explained this by showing
that the business environment was perceived as only
moderately uncertain. Factors like government regulation
and global trends were unpredictable, but customer
demands and competition were stable. This mixed
environment did not push firms to one extreme, and they
ended up using a combination of both diagnostic and
interactive controls.
H2: Ownership
(by Ethnicity)
Firms, regardless of
their owner's ethnicity,
will use PMSs
interactively.
Rejected
The quantitative results showed no statistically significant
difference in PMS use among Indigenous-owned,
European-owned, and Indo-Tanzanian-owned firms.
However, the qualitative case studies revealed that
ethnicity strongly influenced management style. All three
ethnic groups fostered informal, hands-on, and
relationship-based management styles, which naturally
favoured interactive dialogue. This suggests that different
cultural paths led to a similar interactive management
outcome, masking any statistical difference between the
groups.
H3: Business
Size
Firms, regardless of
their size, will use PMSs
interactively.
Rejected
The quantitative analysis found no significant link between
firm size (measured by employees or rooms) and the style
of PMS use. The study's sample consisted overwhelmingly
of small firms (94% by room count), which limited the
statistical power to detect size-based differences. The
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qualitative data indicated that both small and medium-sized
firms used informal, personal controls due to their flat
organisational structures and the owners' direct
involvement in daily operations, which supports an
interactive style regardless of minor size differences.
H4: Strategy
Firms with a low-cost
strategy will use PMSs
diagnostically (H4a),
while firms with a
differentiation strategy
will use them
interactively (H4b).
Partially
Accepted
- Low-Cost → Diagnostic Use (H4a): Rejected. The
relationship was not significant.
- Differentiation → Interactive Use (H4b): Accepted. A
significant positive relationship was found.
- Unexpected Finding: A significant positive relationship
was also found between Differentiation Strategy and
Diagnostic Use.
Explanation: The firms overwhelmingly used a
differentiation strategy focused on high-quality service. To
achieve this, they needed interactive methods (e.g., direct
customer feedback, staff meetings) to ensure service
quality, confirming H4b. However, they also needed
diagnostic tools to monitor costs and key metrics to ensure
their high-quality service was delivered profitably,
explaining the unexpected positive link to diagnostic use.
Part 2: The Influence of PMS Use on Organisational Capabilities
This section addresses the impact of diagnostic and interactive PMS use on four key capabilities: Teaming of
Resources, organisational Routines, Entrepreneurship, and Innovativeness.
Hypothesis
Group
Research
Hypothesis
Result
Explanation of Results
H5:
Diagnostic
Use
Diagnostic use of
PMS will limit
the deployment
of organisational
capabilities.
Rejected &
contradicted
- Teaming of Resources: No significant relationship found. The
hypothesis was rejected.
- organisational Routines: A significant positive relationship was
found with Planning & Control routines and Sustainability
routines. This contradicts the hypothesis.
- Innovativeness: A significant positive relationship was found.
This also contradicts the hypothesis.
Explanation: The study suggests that because the SMEs operated
in a stable environment and used diagnostic controls informally,
these controls did not stifle capabilities. Instead, they provided a
necessary structure for effective planning and control, which in
turn supported innovation rather than hindering it.
H6:
Interactive
Use
Interactive use of
PMS will
promote the
deployment of
organisational
capabilities.
Partially
Accepted
- Teaming of Resources: Accepted. Interactive use was
significantly and positively related to the ability to combine
physical, relational, and communication resources.
- organisational Routines: Partially Accepted. A significant
positive relationship was found with Operational Routines only.
- Entrepreneurship & Innovativeness: Rejected. No significant
relationship was found.
Explanation: Interactive methods like regular meetings and open
dialogue directly facilitate the coordination required for
combining resources and managing daily operational routines. The
lack of impact on entrepreneurship and innovation was attributed
to the firms' small size, limited resources, and a "lifestyle
entrepreneur" mindset, which constrained their ability to pursue
major innovations regardless of management style.
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Part 3: The Influence of Capabilities on Organisational Performance
This final section addresses the third research objective by testing the indirect effect of PMS use on
organisational performance, mediated by the four capabilities. The key test is whether the capabilities themselves
are linked to performance.
Hypothesis
Group
Research Hypothesis
Result
Explanation of Results
H7: Indirect
Effect on
Performance
The four organisational
capabilities will
positively influence
organisational
performance.
Partially
Accepted (with a
major
contradictory
finding)
- Teaming of Resources → Performance: Partially
Accepted. Only the "Owners’ Experience and
Relational Resources" dimension had a significant
positive impact on performance.
- organisational Routines → Performance: Mixed
Results.
- Planning & Control Routines had a significant
positive impact.
- Operational Routines had a significant negative
impact. This is a major counterintuitive finding that
contradicts the hypothesis.
- Entrepreneurship & Innovativeness → Performance:
Rejected. No significant impact was found.
Explanation: The positive findings are logical:
experienced owners and good planning lead to better
performance. The major unexpected finding is that
better operational routines were linked to worse
performance. The dissertation suggests this could be
because the informal systems led managers to focus
too heavily on daily tasks at the expense of long-term
strategy, or that the routines themselves were
inefficient. The lack of impact from entrepreneurship
and innovativeness on performance reinforces the idea
that these capabilities were too constrained by limited
resources to drive tangible results in this sample.
Contingency Factors and Use of Performance Management Systems
Figure 1 Model A (i) – Hypothesis 1–4 Figure 2 Model A (ii) – Hypotheses 1–4
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Table 1Contingency Factors and Use of Performance Management Systems: Results of Hypotheses Testing H1,
H2, H3, & H4
Figure 3 Model B – Hypotheses 5-7
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Table 2 Contingency Factors and Use of Performance Management Systems: Results of Hypotheses Testing _
H5 & H6
Table 3 Contingency Factors and Use of Performance Management Systems: Results of Hypotheses Testing _
H7
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CONCLUSION
The central conclusion is that Performance Measurement Systems (PMSs) enhance the organisational
performance of Tanzanian tourism SMEs indirectly, by improving specific organisational capabilities. Rather
than a direct link between measuring performance and achieving better results, the thesis concludes that the value
of a PMS lies in its ability to strengthen the underlying functions of the business. The study's findings are
synthesised into a comprehensive conclusion that addresses its three main research objectives.
1. The Use of PMS is Nuanced and Context-Dependent
The study concludes that tourism SMEs in Tanzania do not use Performance Measurement Systems in a purely
diagnostic (monitoring) or interactive (dialogue-focused) way. Instead, they employ a flexible blend of both
approaches.
1. Influence of Strategy: The most significant factor influencing PMS use was the firm's strategy.
Businesses pursuing a differentiation strategy (focusing on high-quality, unique services) were found to
use PMSs both diagnostically to control costs and interactively to ensure service quality and customer
satisfaction.
2. Limited Influence of Other Factors: Other factors like environmental uncertainty, ownership by ethnicity,
and business size did not show a statistically significant relationship to the style of PMS use. The research
concludes this is because the business environment was only moderately uncertain, and the small size
and informal management style of most firms naturally fostered an interactive approach regardless of
other factors.
2. The Impact of PMS on Capabilities is Specific and Sometimes Contradictory
The thesis concludes that the way a PMS is used has a direct and specific impact on different organisational
capabilities, though not always in the way that was initially hypothesised.
1. Interactive Use Boosts Collaboration: The interactive use of PMS (e.g., frequent meetings, open
dialogue) significantly enhances a firm's ability to combine and utilise its resources, a capability the study
terms "resource teaming".
2. Diagnostic Use Strengthens Planning: Contrary to the initial hypothesis that diagnostic use would limit
capabilities, the study found it had a significant positive impact on organisational Routines, particularly
those related to planning and control. It also positively influenced Innovativeness. The conclusion is that
in a stable environment, these formal checks provide a necessary structure that supports, rather than
stifles, organised innovation.
3. Entrepreneurship and Innovativeness Remain Constrained: The study concludes that neither diagnostic
nor interactive PMS use significantly boosted the capabilities of entrepreneurship or innovativeness. The
author attributes this to overriding constraints such as limited financial resources, the small scale of the
businesses, and a "lifestyle entrepreneur" mindset, which were more powerful than the influence of the
PMS.
3. The Path to Improved Performance is Indirect and Mediated
The final and most critical conclusion of the thesis is that the link between PMS use and overall organisational
performance is not direct. Performance improves only when the PMS successfully enhances specific, value-
creating capabilities.
Key Capabilities Driving Performance: The study concludes that two capabilities were the primary mediators
through which PMSs improved performance:
1. Teaming of Resources: Specifically, the "Owners’ Experience and Relational Resources" dimension,
which includes industry experience and professional networks.
2. Organisational Routines: Specifically, the "Planning and Control" routines, which provide structure and
strategic direction.
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A Major Contradictory Finding: The study uncovered a significant negative relationship between operational
routines and organisational performance. The thesis concludes that this may be because the informal systems
led managers to become too focused on daily, short-term tasks, potentially at the expense of strategic, long-term
activities.
By integrating these findings, the study concludes that for a Tanzanian tourism SME, the most effective path to
better performance is to use a PMS to leverage the owner's experience and industry relationships while
establishing strong planning and control processes. Simply measuring outcomes is not enough; the measurement
system must be used to build these specific internal strengths.
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