Asset Capitalization and Firm Performance: A Comparative Study of Self-Employed Vocational and Non-Vocational Graduates in Arusha and Dar es Salaam, Tanzania

Abstract

Despite the importance of assets capitalisation, studies show doubts whether such capitalisation contributes to business performance. This paper thus, determines the performance of businesses owned by Vocational and non-Vocational graduates, compares performance in terms of revenue and net worth, and determines the assets capitalization effect on revenue. The study adopted a descriptive cross-sectional survey design and the sample size was 384 respondents. Descriptive statistics, independent samples t-test and multiple linear regression were used to analyse data. With descriptive statistics, results indicated that Vocational graduates' performance was numerically higher than non-Vocational graduates. However, independent samples t-test results indicated F (382) = 0.579, p = 0.563 and F (382) = 0.801, p = 0.422 for revenue and net worth respectively, indicating insignificant difference in performance between the groups. The results deviate from the Human Capital Theory, probably due to the facts that vocational graduates in the country are said to be partially trained as compared with developed nations. Multiple linear regression results indicate that property, plant and equipment (β = 0.500, p = 0.000), total business' assets (β = 0.090, p = 0.046), years’ experience in business (β = 0.379, p = 0.000) and education level of business owner (β = -0.065, p = 0.025) had a significant influence on revenue. These findings help to conclude that there is no significant difference in performance between Vocational and non-Vocational graduates. However, both groups were able to utilize assets and their experience in business to generate more revenue, thus a need to extend the Human Capital Theory to include tangible capital to fit the new context is inevitable. Therefore, it is recommended that experience in business and investment in assets should be given priority by policy makers and self-employed.