Effects of Supply Chain Integration and Value Creation on Performance of Manufacturing Firms in Nairobi County Of Kenya

Abstract

In today’s highly competitive and rapidly changing business landscape, organizational performance is critical for success. Organizations must continually improve their performance to meet the ever-increasing demands of customers, stakeholders, and the market. The objective of the study was to determine the mediating effect of value creation on the relationship between supply chain integration and the organizational performance of manufacturing firms in Nairobi County, Kenya. Specifically, the study sought to determine the effect of supply chain integration on organization performance, the effect of supply chain integration on value creation, the effect of value creation on organizational performance, as well as the mediating effect of value creation on the relationship between supply chain integration and organization performance of manufacturing firms in Nairobi County, Kenya. The study was informed by resource based view (RBV) theory, resource dependence theory, and knowledge-based theory. The philosophical foundation of this study is in line with the positivist approach. Anchoring on an explanatory research design, the study target population was 1,255 respondents from 251 manufacturing firms in Nairobi, Kenya. The study sample size was 191, computed using the Nassiuma’s formula. The firms were selected using stratified and simple random sampling techniques. Data was collected using structured questioners and items anchored on a five-point Likert scale. The study hypotheses were tested using a multiple regression model and the Hayes process macro for mediation analysis. The regression results revealed that supply chain integration (β = 0.390, p = 0.000) had a positive and significant effect on organization performance. In addition, supply chain integration (β = 0.4092, p = 0.000) had a positive and significant effect on value creation. While value creation (β= 0.589, p = 0.000) had a positive and significant effect on organizational performance, It was also discovered that value creation had a significant mediating effect on the relationship between supply chain integration [mediating index = 0.1802, CI (0.1101, 0.4039)] and firm performance. The study concludes that supply chain integration and value creation are complementary and strategic resources that enhance organizational performance. The study findings propose a framework showing the contribution of supply chain integration and value creation to enhance overall organizational performance. Furthermore, the assimilation of value creation would be pertinent for future studies to examine the mediating effect of value creation on individual dimensions of supply chain integration (internal, supplier, logistic, and customer integration) on organization performance in the current settings of digital transformation and where supply chain integration is required.