Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

Key Words:
Small business, entrepreneurship, hotels, comparative analysis.
INTRODUCTION 
The importance of small businesses for economic growth is hardly an issue that can be contested. Still, 
developing nations continue to focus on attracting foreign direct investment in large and luxury properties. 
Similarly, research has mostly focused on analyzing larger hotel activity while the economic impact and 
performance of small businesses remains largely unexplored. At the same time, it is becoming clear that small hotels 
can be an important element of private sector activity in developing nations by contributing to economic growth and 
productivity (Sharma, 2006). Small businesses as a conscious approach to development present itself as a relatively 
new found opportunity for many developing nations. While Tanzania has committed to strengthening its tourism 
industries, much of this activity remains clustered in the northern region, or around the city of Arusha. Other 
important tourism hubs are Dar es Salaam and Mwanza. Even though small hotels face different and varying levels 
of challenges in these three cities, some have been more successful than others. This paper compared small hotel 
clusters in these three cities to understand factors that are impacting small businesses. Clustering was used in this 
paper as a mode of inquiry within a spatial context rather than a precise measurement tool (Porter, 1998). To the best 
of our knowledge, spatial analysis of small business clusters has not been used to study hotel activity, especially in 
context of economic growth in developing countries. As a consequence, this paper contributes to the literature by 
providing policy analysis to understand spatial development of small businesses.