Assessment of the influence of macroeconomic factors on participation of indigenous firms in Tanzania construction industry

Abstract

Participation of indigenous firms in a construction industry is an engine for industrial growth in developing countries. Despite its importance, indigenous firms suffer from poor participation. This study aimed to investigate whether macroeconomic and other factors exert influence on participation of indigenous firms in the construction industry for the purpose of developing a model to enhance participation. The study adopted cross sectional research strategy and opinion survey method. Respondents were selected based on stratified random sampling. Questionnaire was used for data collection. Data analysis was based on Probit regression. According to empirical results, the more the retained earnings, size of firm and access to credit increase, the more likely the firm would participate while, the more the exchange rate, interest rate and economic downturn increase, the less likely the firm would participate. This study is significant for practical and theoretical pursuits as there is still a need for theory building to enhance participation of indigenous firms in the construction industry. Furthermore, the study proposed a model that could be used to enhance participation. This study is delimited to the formal sector only. The study recommends improvement of business support systems and stabilization of macroeconomic variables in the country.