Abstract:
Successful economic performance and value creation are considered as the major
drivers for an organization in a dynamic business environment. Performance of State
Corporations in Kenya is of interest since they play a critical in enhancing economic
and national development. Enterprise risks pose threats to the ability of an
organization to execute business processes and create value. This research sought to
examine the moderating effect of intellectual capital on the relationship between
enterprise risk management ERM practices and organizational performance of state
corporations in Kenya. The specific objectives of the study were: to determine the
influence of risk structure practices on organizational performance of state
corporations in Kenya, to establish the influence of risk governance practices on
organizational performance of state corporations in Kenya, to examine the influence
of risk management process practices on organizational performance of state
corporations in Kenya, and to establish the moderating effect of intellectual capital on
the relationship between ERM practices and organizational performance of state
corporations in Kenya. This study adopted a positivist approach and was guided by
agency theory and resource based theories in explaining the different perspectives in
which intellectual capital and ERM practices affect organizational performance. The
study used explanatory research design. Primary data on ERM practices, intellectual
capital and organizational performance was collected using structured questionnaires.
A survey was carried out on 218 state corporations in Kenya. Data collected was
analyzed by use of descriptive and inferential statistics. The research hypotheses were
tested using hierarchical multiple regression analysis. The results revealed that ERM
structure practices had a positive and significant effect (β = 0.27, p<0.05) on
organizational performance. ERM governance practices were found to positively and
significantly (β=0.33, p<0.05) influence organizational performance. In addition,
ERM process practices had a positive and significant effect (β=0.21, p< 0.05) on
organizational performance. Furthermore, the study found that intellectual capital had
an enhancing and significant moderation effect on the relationship between ERM
Structure practice (β =.314, ρ< .05, ΔR 2 =.010), ERM governance practices (β =.550,
ρ< .05, ΔR 2 =.019) and ERM process practices performance (β = .419, ρ< .05,
ΔR 2 =.015) and organizational performance.
In conclusion, ERM structure,
governance and risk management process practices enhances organizational
performance. In addition, intellectual capital enhances the relationship between ERM
practices and organizational performance of SCs in Kenya. The study recommends to
policy makers that enterprise risk management needs to be considered as a strategic
objective in SCs. Therefore, it is necessary to integrate risk management practices
across all functions. Further, the study supports agency theory by focusing on ERM as
a hedging tool to avoid principal -agency conflict. It also supports, resource based
theories by centering intellectual capital as a resource deployed to enhance
competitive advantage. Lastly, the study contributes to knowledge on organizational
performance by providing the empirical evidence on the moderating effect of
intellectual capital on the relationship between ERM practices and organizational
performance.