Effect of Leadership Style and Organisational Culture on the Relationship Between Innovation and Performance of Firms Listed in the Nairobi Securities Exchange

Abstract

The need to gain and sustain a competitive advantage is overwhelming for businesses, especially now with cut throat competition. Innovation has been suggested as one way of gaining the advantage sustainably thus improving firm performance But innovation can only happen within certain enabling environment and cultures. This study objectives included determining the relationship between Innovation and firm performance, ascertaining the influence of Organizational culture on the relationship between innovation and firm performance, establishing the influence of Leadership Style on the relationship between innovation and Finn performance, examining the combined effect of Leadership Style and Organizational Culture on the relationship between Innovation and Firm performance and establishing the joint effect of Innovation, Organizational Culture and Leadership Style on Firm Performance. This was a cross sectional survey conducted among firms listed on the Nairobi securities Exchange. Questionnaires were administered in all the 55 firms listed on the Nairobi securities and a total of 36 completed questionnaires were received and analyzed. Both primary and secondary data were used and regression analysis method was employed. The results showed that there was a strong positive relationship between innovation and performance. Both Organizational Culture and Leadership style had a moderating effect on the relationship between Innovation and firm performance. The combined effect of Leadership Style and Organizational Culture also had a moderating effect on the relationship between innovation and Firm performance. The study also established that the joint effect of Innovation, Organizational Culture and Leadership Style on Firm Performance is different from the effect of the individual study variables. Major conclusions of the study include the confirmation strong relationship between innovation and firm performance and that the joint effect of the all the variables under study was different from each acting individually. Like all similar studies that use regression analysis, there is always the limitation of assuming linearity which may not always exist. Further limitation was the use of NSE listed firms only. There were theoretical, policy and managerial implications of this study. Theoretically, study drew expression of interrelations between various variables, offered generalization of understanding and meaning of these relationships thus expanding the frontiers of knowledge with respect to innovation, organizational culture, Leadership Style and firm performance. Policy implications included the fact that the government can use the results to develop relevant and practical policies such as budgetary policies regarding innovation, Organizational Culture and Leadership style. Management practice implications include decisions in matters of reward for innovative ideas, disciplinary actions against staff who commit poor leadership practices and encouraging an organizational culture which does not inhibit innovation. Suggestions for further research include investigating the relationships among the individual dimensions of innovation, carrying out similar research but now focusing on public sector and finally employing different measures of financial performance.

The need to gain and sustain a competitive advantage is overwhelming for businesses, especially now with cut throat competition. Innovation has been suggested as one way of gaining the advantage sustainably thus improving firm performance But innovation can only happen within certain enabling environment and cultures. This study objectives included determining the relationship between Innovation and firm performance, ascertaining the influence of Organizational culture on the relationship between innovation and firm performance, establishing the influence of Leadership Style on the relationship between innovation and Finn performance, examining the combined effect of Leadership Style and Organizational Culture on the relationship between Innovation and Firm performance and establishing the joint effect of Innovation, Organizational Culture and Leadership Style on Firm Performance. This was a cross sectional survey conducted among firms listed on the Nairobi securities Exchange. Questionnaires were administered in all the 55 firms listed on the Nairobi securities and a total of 36 completed questionnaires were received and analyzed. Both primary and secondary data were used and regression analysis method was employed. The results showed that there was a strong positive relationship between innovation and performance. Both Organizational Culture and Leadership style had a moderating effect on the relationship between Innovation and firm performance. The combined effect of Leadership Style and Organizational Culture also had a moderating effect on the relationship between innovation and Firm performance. The study also established that the joint effect of Innovation, Organizational Culture and Leadership Style on Firm Performance is different from the effect of the individual study variables. Major conclusions of the study include the confirmation strong relationship between innovation and firm performance and that the joint effect of the all the variables under study was different from each acting individually. Like all similar studies that use regression analysis, there is always the limitation of assuming linearity which may not always exist. Further limitation was the use of NSE listed firms only. There were theoretical, policy and managerial implications of this study. Theoretically, study drew expression of interrelations between various variables, offered generalization of understanding and meaning of these relationships thus expanding the frontiers of knowledge with respect to innovation, organizational culture, Leadership Style and firm performance. Policy implications included the fact that the government can use the results to develop relevant and practical policies such as budgetary policies regarding innovation, Organizational Culture and Leadership style. Management practice implications include decisions in matters of reward for innovative ideas, disciplinary actions against staff who commit poor leadership practices and encouraging an organizational culture which does not inhibit innovation. Suggestions for further research include investigating the relationships among the individual dimensions of innovation, carrying out similar research but now focusing on public sector and finally employing different measures of financial performance.