Effects of electric power outage dynamics on the performance of manufacturing firms in Kenya

Abstract

Most manufacturing firms in both developed and developing economies are reliant on electric power supply for their existence. Therefore, instances of electric power outage are real operational threats to those firms especially in the African continent. Many firms invest in backup generation to mitigate negative effect of outages on firm operations; however, this action does not always result in positive outcomes. This study aimed at establishing the joint effect of electric power outage dynamics, investment in back up generation and firm characteristics on manufacturing firm performance. More specifically, the study focused on the following specific objectives; to establish the influence of electric power outage dynamics on performance of manufacturing firms in Kenya, to assess the effect of investment in back up generation on the relationship between electric power outage dynamics and performance of manufacturing firms in Kenya, to determine the effect of firm characteristics on the relationship between electric power outage dynamics and performance of manufacturing firms in Kenya and to assess the joint relationship amongst electric power outage dynamics, investment in back up generation and firm characteristics on the performance of manufacturing firms in Kenya. The current study made use of positivism philosophical paradigm and descriptive survey research design respectively. The four null hypotheses were subjected to significance test whereby multiple regression models and stepwise multiple regressions models were incorporated. The sample size was 138 which was drawn from a population of 447 firms whose main area of focus is manufacturing in Kenya and were also members of Kenya Manufacturers Association. Structured questionnaires were utilized to collect data which involved drop and pick methodology. The research results indicate that electric power outage dynamics had statistically significant influence on firm performance. Investment in backup generation intervened the correlation between electric power outage dynamics and firm performance. Firm characteristics on the other hand had no statistically significant moderating effect on the link between electric power outage dynamics and firm performance. The joint influence of electric power outage, investment in backup generation and firm characteristics on performance was not statistically significant. Firms should consider the extent to which the individual components of electric power outage dynamics have on performance instead of focusing on composite aspects. Further, the capacity of power generation equipment that firms invest in has a significant effect in minimizing negative impact of power outage on firm performance and should be carefully considered. In addition, firm characteristics do not have a significant moderating influence on the impact of electric power outage on firm performance as their presence or absence do not determine the direction or strength of the correlation between electric power outage dynamics and firm performance. This is due to the fact that electric power is a significant input factor for all manufacturing firms in the study regardless of their varying characteristics.