Organizational Capacity, Strategy Implementation, Competitive Environment and Performance of Companies Listed on the Nairobi Securities Exchange

Abstract

The purpose of this research was to contribute to the extant knowledge on the relationship between organizational capacity, specifically leadership style and resources and performance of companies listed at Nairobi Securities Exchange. More specifically, it sought out to establish the mediating and moderating roles of strategy implementation and competitive environment respectively, in the said relationship. A review of extant conceptual and empirical literature was done and a hypothesis formulated. A positivist paradigm relying on descriptive research design was used. The study was a census and relied on both secondary and primary data. The population comprised 62 companies listed at Nairobi Securities Exchange and was active at the time of data collection in 2013. The respondents were managers in charge of finance and business strategy. A structured Likert questionnaire anchored on a five-point scale was used to collect primary data. Secondary data on profits, equity, and dividends per year was collected online from the company‘s‘ annual reports. Descriptive and inferential statistics were both used to analyze the data. Pearson Correlation, simple linear and stepwise and multiple regression analysis were used in hypothesis testing. The results revealed that organizational capacity significantly affects firm performance, strategy implementation mediates the relationship between organizational capacity and firm performance, competitive environment is not a significant moderator of the relationship between organization capacity and firm performance, and the joint effect of organization capacity, strategy implementation, and competitive environment on performance is not significantly different from their individual predictor variable effect. The study contributes to theory building by demonstrating empirically that efficient bundling of resources (leadership style and resources) resulting to more complex interdependencies which are harder to imitate and contribute to firm performance, it further confirms the value and application of resource-based theory. The study also contributes to knowledge by empirically confirming that organizational capacity significantly influences performance through effective strategy implementation. The results did not support competitive environment as a significant moderator of the relationship between organizational capacity and firm performance, implying that all the companies were able to manage their competitive environment effectively or were equally affected by the competitive environment. This issue, however, require further investigation. The concept of synergy as was implied by the joint effect of all the variables was unconfirmed, suggesting that organizations, when evaluating factors that have influence on their performance need to avoid lamping the factors together, but rather should evaluate their impact individually. Not all synergy is positive and not all variables may be key contributors to performance. This study may have been constrained by the use of one respondent per firm and combining many industries since different industries have different challenges. Future researchers could involve more respondents across the management hierarchy per firm to further validate their findings and make them more useful for generalizability, focus on firms in similar industry, replicating such a study in a bigger population longitudinally.