The Joint Influence of Organisational Resources, External Stakeholders and Expansion Strategies on the Performance of Commercial Banks in Kenya

Abstract

Firm performance is at the heart of strategic management research. Performance related research seeks to answer questions such what causes inter-firm performance differences, why they behave the way they do and how they make strategic choices. This study sought to establish the role resources play as drivers of performance in the presence of external stakeholders and expansion strategies. The overall goal of this thesis was to interrogate the joint influence of organisational resources, external stakeholders and expansion strategies on the on the performance of the banking industry in Kenya. The research was founded on a predominantly positivist research paradigm and a cross sectional survey design targeting the 43 commercial banks in Kenya. Empirical data was collected using a 5 point Likert scale questionnaire from senior managers within the banks. The data was analysed using regression analysis to establish the relationships between the variables. The thesis established that resources significantly account for variation in firm performance leading to the rejection the first null hypothesis. The test of the second hypothesis revealed that external stakeholders moderate the resource-performance relationship hence we rejected the second null hypothesis as well. The test of H3 established that expansion strategies have an intervening effect on the resources-performance relationship hence we rejected the third null hypothesis. Even though the fourth hypothesis coefficients supported the existence of a significant relationship among the four model variables, these coefficients were not greater in magnitude compared to individual model coefficients. In particular the interaction term coefficients were more significant than the joint influence variables hence we accepted (failed to reject) the fourth and final null hypothesis. The implications of the study include that managers should invest in value creating resources, pay close attention to key external stakeholders and carefully plan expansion strategies to ensure optimal sustained performance of their firms. Policy makers should provide policy guidelines that foster resource utilisation and informed expansion by banks which would result in good and sustainable performance. Managers should consider organisational resources, external stakeholders and expansion strategies separately and jointly influence performance. The recommendations made included that organisations should consider the impact of key external stakeholders on the with a view to effectively managing these relationships to ensure sustainable performance. The managers of commercial banks and other commercial entities, borrowing from these findings could enhance the utilisation of resources in their control to enhance the competitiveness of their organisations by appraising their policies accordingly. The small banks particularly, can borrow from these findings and implement productive expansion strategies that match their business philosophies and growth strategies. The regulator CBK can tailor regulatory capital requirements imposed on commercial banks to help banks meet their regulatory capital requirements. The study adds to the steadily growing body of literature in academic circles about the role or resources in driving firm performance and will aid theory building by validating various theories. The additionally demonstrated that resources are a key determinant of firm performance and a source of competitiveness. The overarching conclusion is that resources account for a significant variation of the performance in banks in Kenya. The resource-performance relationship in the Kenyan banking industry is moderated and intervened by external stakeholders and expansion strategies respectively