Influence of Organizational Capabilities on Non-Financial Performance of Manufacturing Firms in Kenya

Abstract

Over a long period, the relative size of the manufacturing sector in Kenya has been stagnant, it has lost market share abroad, and it is struggling with structural inefficiencies, low overall productivity and large productivity differences in firms across sub-sectors. A recent review of the manufacturing industry’s performance from 2013- 2017 indicated that manufacturing firm’s contribution to the economy contracted more than any other sector during the five years. The trends remain unpromising indicating that the nation may never achieve its 2030 vision of becoming globally competitive and successful upper middle income country. The general objective of the study was to investigate the influence of organizational capabilities on non-financial performance of manufacturing firms in Kenya. The specific objectives were: to establish the influence of knowledge management capabilities, technological capabilities, managerial capabilities, coordination capabilities and marketing capabilities on non-financial performance of manufacturing firms in Kenya. The study also sought to determine the moderating effect of managers’ cognition on the relationship between organizational capability and non-financial performance of manufacturing firms in Kenya. The target population consisted of 513 manufacturing firms. The study used a sample size of 225 firms in Nairobi and its environs (Machakos, Kiambu, Ruiru, Thika and Limuru). Stratified random sampling technique was used to select the sample within the target population. The study used survey design and the collection of primary data was through self-administered questionnaires. Reliability and validity of the research instrument was also conducted during pilot study. Reliability was tested using cronbachs alpha while validity was tested using content validity. Data was then analyzed using descriptive statistics and inferential statistics where data was coded and descriptive statistics generated using Statistical Packages for Social Sciences. Results were presented using graphs, tables and chart. The study found that technological capabilities, marketing capabilities, coordination capabilities and managerial capabilities have a positive and significant effect on performance. In addition, the study found that managers’ cognition moderates the relationship between organizational capabilities and firm performance. The study concluded that organizational capabilities (technological capabilities, managerial capabilities, marketing capabilities, knowledge management capabilities and coordination capabilities) positively and significantly influence performance of manufacturing firms in Kenya. The study recommends that firms should strive to cultivate organizational capabilities. Recommendation is made to the manufacturing firms’ management to come up with ways and procedure to enhance the capabilities of individual players such as the managers and subordinate staff in terms of technology, Management capabilities, coordination capabilities, marketing capabilities and knowledge management capabilities. This could be done through arrangements for trainings and benchmarking from other firms that are doing well in these areas.