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Manufacturing firms in Kenya are bedeviled with challenges associated with doing
business in an environment of increasing competition and regionalization, which, if
mitigation measures are not urgently instituted, are likely to have a negative impact on
their performance and competitiveness. Several studies have been done on the
determinants of Entrepreneurial Orientation (EO) and the performance of manufacturing
firms (FP) in Kenya, though little is known about the moderated mediation effect in the
relationship. Hence, this study proposed that networking capability (NC) and
transformational leadership (TL) may further explain the relationship between EO and
FP. Therefore, given the aforementioned argument, this study sought to examine the
effect of EO, TL, and NC on performance among the manufacturing firms in Nairobi
County, Kenya. The specific objectives were to: Analyse the effect of EO on FP;
Ascertain the effect of NC on FP; Examine the effect of TL on FP; Determine the effect
of EO on NC; Determine the mediating effect of NC on the relationship between EO and
FP; Analyse the moderating effect of TL on the relationship between EO and NC, EO and
FP, NC and FP; Examine the moderating effect of TL on the indirect effect of EO on
manufacturing FP via NC. The study was guided by the Resource Based View theory and
supported by the Dynamic capability & relational view theory. This study employed the
positivism paradigm which assesses the cause that influences the outcome of study
variables. The study adopted an explanatory research design with the aid of
questionnaires to collect data. The study utilized primary data which was collected from a
sample of 400 manufacturing firms using structured questionnaires which was derived
from the target population that comprised of 1072 manufacturing firms in Nairobi
County. The sample selection techniques used were stratified random sampling.
Reliability testing using Cronbach’s Alpha testing was used to test the appropriateness of
the questionnaire in the study. Hierarchical Regression was used to test the study
hypotheses. Results for the direct effects were as follows: EO had a significant direct
effect on EP with β = .85, p <.001 with R 2 .71, and ΔR 2 .69, F (3,396) = 321.77, p <.001;
EO and NC on FP equally had a significant direct effect with β = .56, p <.001 and β = .50,
p <.001 with R 2 .87 and ΔR 2 .18, respectively with a statistically significant F (4,395) =
767.07, p <.001. NC and TL on FP showed significant effects with β = .31, p <.001and β
= .38, p <.001 respectively, with R 2 .96 and ΔR 2 .08, with a statistically significant F
(5,394) = 1929.08, p <.001. To test for mediation and moderated mediation, the study
utilized Process Macro Version 4.0 model 4 and model 59 respectively. The study
findings reported mediation effect of NC as positive and significant indicating M3 = (a 1 ×
b 1 ) =.56 × .50 = .28, SE = .05, 95% CI = [.17, .37], which was significant with the
confidence interval (CI) not straddling a zero. Furthermore, results showed that TL had a
moderating effect on the relationship between EO and NC, EO and EP, NC and EP with
the interaction results found to be significant with β = -.13, p <.001; β = .03, p = .005; β =
-.02, p = .006 respectively. Lastly, moderated mediation was evident as follows; (a 1 +d W)
(b 1 +f W) = (.56 + .03) * (.50 + [-.02]) = .28. Conclusively, networking capability and
transformational leadership significantly affect the relationship between Entrepreneurial
orientation and Firm performance. The study recommends that manufacturing firms
should instill the resource of entrepreneurial orientation through a blend of networking
capability and transformational leadership so as to strategically enrich firm performance.
Additionally, it calls for the extension of this research on the used theories on this topic
by using other methods like longitudinal and other approaches in variety of sectors with a
global view. |
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