Firm Characteristics, Industry Structure, Strategy and Performance of Law Firms in Kenya

Abstract

Explaining and often predicting organizational performance is a primary research objective in the field of strategic management that need to be addressed because performance improvement is at the heart of strategic management. The study conceptualized a relationship between firm characteristics, industry structure, strategy and performance of law firms in Kenya. Firm characteristics have been posited to influence performance. However, there is observed lack of consensus with regard to this position, hence the need for more empirical explanation. The role of industry structure and strategy in the relationship between firm characteristics and performance has not received conclusive empirical backing. The study was contextualized in law firms in Kenya in which these variables have not been empirically tested. The main objective of this study was to determine the influence of firm characteristics, industry structure and strategy on the performance of law firms in Kenya. To achieve this objective, four specific objectives were set and corresponding hypotheses were formulated and tested at 95 percent confidence level. The study was guided by resource based theory, the institutional theory and industrial organizational economics theory. Through a cross-sectional descriptive survey, data was obtained using a semi-structured questionnaire. The questionnaire was administered to a sample of 379 law firms spread across the country. Hypotheses were tested using both simple and multivariate regression analysis as well as hierarchical analysis for moderating effects and path analysis for the intervening effect. The findings show that firm characteristics have a statistically significant influence on performance of law firms in Kenya. Industry structure and strategy were both found to have statistically significant moderating and intervening effect respectively on the relationship between firm characteristics and performance. Results of each of the variables independently on performance were statistically significant. The results support the Resource Based Theory, Institutional Theory as well as Industrial Organization Economics Theory. The study contributes to knowledge in the field of strategic management by establishing effects of industry structure and strategy through moderating and intervening on the relationship between firm characteristics and performance. Managers will use the findings of this study to monitor the crucial performance drivers in their law firms with regard to firm characteristics, industry structure and strategy. The study has offered direction for policy makers and the owners of the law firms in Kenya. Based on the limitations of the study, areas for further research have been suggested. Future research can be undertaken in SMEs and large firms in manufacturing and other service sectors using the same conceptualization as the current study. Methodologically, a longitudinal survey can be undertaken in the same context on the same variables to assess the impact of time over their influence on performance.