The effect of top managers’ human capital on SME productivity: the mediating role of innovation

Using a sample of 309 Small and Medium-sized Enterprises (SMEs) from Tanzania and applying partial least square structural equation modeling, the study analyses the different effects of managers' general and specific human capital on SME innovation and productivity. The results demonstrate that top managers with higher education qualification place greater importance on non-technological innovation in comparison with their less educated peers. They further show that managers with more years of experience in the sector place higher importance on technological innovation than their less experienced counterparts. In addition, the results show that SMEs with managers who have higher education qualification achieve higher productivity than their less educated peers, with marketing innovation partially complementarily mediating this relationship. The effect of top managers' experience in the sector on SME productivity is shown to be insignificant. This paper uncovers the mediating role of marketing innovation on the relationship between top managers' human capital and SME productivity in Tanzania. Previous research did not consider the role of innovation as a means to translate top manager's human capital into firm productivity. These results help to provide some practical suggestions for managers, entrepreneurs and policy makers. This is a cross-sectional study which might not have captured all the effects of top managers' human capital fully.