STRATEGIC CAPABILITIES AND ORGANIZATIONAL PERFORMANCE: A CASE OF PRIVATE UNIVERSITIES IN KENYA

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ABSTRACT

Private Universities in Kenya have continuously faced a number of challenges such as declining quality of educational programs, quality of research, authenticity of degrees granted, flexibility of the university programs, innovations created and efficient utilization of resources at their disposal. Despite the increasing number of students seeking higher education, these numbers have not translated to better performance in these Universities. Modern business environment calls for organizations, including private Universities to identify and exploit strategic capabilities for them  to effectively compete and boost their performance. These universities need to harness their resources, and exploit their competences in order to gain competitive advantage. This study sought to establish the effect of strategic capabilities on performance of private Universities in Kenya. Specifically, it sought to determine the effect of information technology capability, human capital capability, networking capability, and intellectual capability on performance of private Universities in Kenya. The study also sought to determine the mediating effect of competitive advantage and the moderating effect of organizational culture on the relationship between strategic capabilities and performance of private Universities in Kenya. The study was anchored on Resource-based view theory, organizational learning theory, intellectual capital theory, human capital theory, balanced scorecard model and the institutional theory. Further, the study was founded on positivism philosophy and adopted a descriptive survey research design. The target population for the study was the 31 private universities in Kenya while a sample size of 153 respondents was selected using stratified random sampling technique. The respondents included the faculty deans, registrar administration and finance, human resources managers and ICT managers. Primary data was collected using semi structured questionnaire. Quantitative data was analysed using descriptive and inferential statistics and presented using figures and tables. Qualitative data collected through open ended questions was analysed using common themes and presented in narrative form. In testing the significance of the model, the coefficient of determination and F-statistic was computed at 95% confidence level, while hypothesis testing was done using p- values at 5% significance level. The study found that information technology capability, human capital capability, networking capability, intellectual capability, and competitive advantage were adopted to a moderate extent. However, organizational culture was emphasised to a large extent. The study concluded that information technology capability, human capital capability, networking capability and intellectual capability had a significant positive effect on performance of private universities in Kenya. Competitive advantage had a partial mediating effect while organizational culture had a significant moderating effect on the relationship between strategic capabilities and performance of private Universities in Kenya. The study contributes to the body of knowledge by filling contextual, empirical, and conceptual gaps earlier identified in literature. The study recommends that private universities should seek to acquire and maximise information technology capability, human capital capability, networking capability and intellectual capability, in order to boost their performance. Private universities should also differentiate their programmes, manage their cost, and develop market-oriented programmes and specialisations to generate competitive advantage. Finally, private universities should promote learning culture, employee involvement, be customer centric, innovative, and supportive culture. The study suggested that other studies should be conducted in public universities in Kenya and other countries and in other institutions of higher learning to establish if similar conclusions will be reached.

        Background of the Study

CHAPTER ONE INTRODUCTION

Demand for higher education in Kenya in recent decades has led to expanding of many private universities both locally incorporated and foreign establishments. Additionally, in the last decade, the government has encouraged the establishment and accreditation of private universities in Kenya (Kagai, 2014). This increased number of private institutions has made competition among themselves and with public universities intensified (Njoroge, 2014). Other than the fierce competition, these universities are also faced with shortage of financial resources, declining quality of educational programs, quality of research, authenticity of degrees granted, flexibility of the university programs, innovations created and efficient utilization of resources at their disposal. Additionally, efficiency of learning processes, which affects the acquired skills has also been questioned in these universities. Abong’o (2007) observed that universities in Kenya and more specifically private universities have failed to produce graduates who meet industry demands. Owing to these challenges, establishing strategic capabilities for the universities becomes paramount for them to be competitive and at the same time achieve superior performance.

It is noted that the twenty-first century business landscape is undergoing transformation due to a range of factors such as advances in technology, globalisation, environmental changes and shift in customer needs (Ahmad & Schroeder, 2011). The dynamic business environment needs organisations, including private universities to adopt new strategies to effectively compete with others in the market as conventional ways of doing business might not be the best to work within the dynamic business environment more so in the education sector. According to Hatch and Howland (2015), organisations need to come up with effective business strategies if they are to survive in a competitive environment. Effective competition in this sense will require the private universities to enhance their performance while keeping their expenditure at a minimum, improving quality and also differentiating the products they provide to their customers. Njoroge (2014) was of the view that a firm’s performance heavily depends on the management ability to build the firm around the available resources. As such, the management in private universities must identify and exploit their strategic capabilities if they are to remain competitive.

According to Amit (2011) and Boon and Yew (2011), performance is the key force for the existence of all firms. The Resource based view (RBV) Theory points out that the ability of a firm to achieve a competitive advantage and to perform effectively will depend on the resources and capabilities at their organisation disposal. Keller (2014) observed that organizations require strategic capabilities and resources such as financial resources, human resource, physical resources, Information technology, as well as intellectual capital to compete effectively. Private universities, being intellectual based must have adequate Information Technology (IT) capability and networking capability. Additionally, the universities must recruit and maintain high standard human resource, which must be continuously developed through research and innovation (Rothaermel, 2015).