| dc.description.abstract | Performance implications of environment-strategy co-alignment derive from the Environment-Strategy-Performance (E-S-P) paradigm whose origin is the StructureConduct-Performance (SCP) paradigm of Industrial Organization literature. It is argued that the positive performance impact of co-alignment between the environment and strategy of a business is an important theoretical proposition in strategic management. This argument is the basis on which the current study was conceived with the main objective of determining the effect of environment-strategy coalignment on the performance of publicly quoted companies in Kenya.
Four specific objectives emanated from this main objective: (i) to determine the effect of the external environment on corporate performance, (ii) to determine the effect of strategy on corporate performance, (iii) to establish the effect of environment-strategy coalignment on corporate performance, and (iv) to assess moderating effect of firm-level institutions on the relationship between external environment-strategy co-alignment and corporate performance. Out of these four objectives, seven hypotheses were stated and tested.
The study employed a cross-sectional survey design targeting companies listed in the Nairobi Stock Exchange as at 30th June 2010. Through structured questionnaires and interviews, data were obtained from 23 out of 53 companies that were targeted. Secondary data were obtained from published sources. Both descriptive and inferential statistics were used to analyze the data and test hypotheses on the effect of the external environment on corporate performance, the effect of organizational strategy on corporate performance, the effect of environment-strategy co-alignment on performance, and moderating effect of firm-level institutions on the relationship between environment-strategy co-alignment and corporate performance.
The study results showed that the surveyed companies experience varying degrees of external environmental complexity, dynamism, and munificence. These environmental dimensions tended to be mostly manifested in economic factors, competitive rivalry, market factors, technological factors, regulatory factors as well as threat of new entrants. Consequently, these factors appeared to have great influence in the companies' strategic decision making. However, the results for the effect of external environment on corporate performance were statistically not significant.
The results also revealed that the companies leaned more towards the strategic orientations of futurity, analysis, defensiveness, and proactiveness as well as pursued market development, product development, and diversification strategy types to a large extent. In spite of these results, overall results were statistically not significant for the effect of organizational strategy on corporate performance except for the effect of organizational strategy on total net assets.
There were mixed results regarding the individual effect of external environmental dimensions on the various organizational strategy variables. Statistically significant as viwell as statistically not significant effects were reported. Similarly, positive as well as negative effects were also reported. However, overall results were statistically not significant for the effect of external environment on organizational strategy.
The results further showed existence of positive correlations between environment and most strategy variables even though most of the correlations were statistically not significant. The results on performance implications of environment-strategy coalignment were mixed and contradictory. The results revealed a weak to moderate fit between environment and strategy, a fairly low explanatory power of environmentstrategy co-alignment over various measures of corporate performance and statistically not significant results for the effect of environment-strategy co-alignment on corporate performance. Further, there was no relationship between the strength/degree of co-alignment and the resultant effect of the co-aligned environment-strategy variables on the various indicators of performance.
The study also offered evidence that most of the firm-level institutions have statistically not significant positive effects on some indicators of performance as well as negative effect on other indicators. Statistically significant results are reported for the independent effect of structure on Total Net Assets and systems on ROI. The results show a strong relationship between firm-level institutions and corporate performance. Also firm-level institutions accounted for relatively high variation in the various measures of performance. However, the overall results for the effect of firmlevel institutions on corporate performance were statistically not significant.
Finally, the study revealed that the moderating effect of firm-level institutions on the relationship between environment-strategy co-alignment and performance increased the explanatory power (R2) of the co-aligned environment-strategy variables over the various measures of corporate performance. However, the positive change in the explanatory power (R2) as a result of the moderating effect of firm-level institutions is statistically not significant for all the performance indicators. Contrary to expectations, firm-level institutions changed results that were otherwise significant to be statistically not significant. The study did not yield definite conclusions with substantial implications on theory due to low statistical power occasioned by low response rate. Overall, the study partially concurs with related empirical studies but also contradicts some. | en_US |
