Top Management Team Diversity and Competitive Advantage of Insurance Companies in Kenya

Abstract

Strategy scholars have demonstrated that senior executives in firms affect enterprise outcomes. The characteristics of executives affect strategies that catapult firms to greater heights, making strategies pivotal predictors of competitive advantage in enterprises. Upper echelon theory that relates executive observable qualities to entity outcomes anchored the study. The research evaluated the effect of structural interdependence and strategic orientation on the association between top management team diversity and competitive advantage of insurance companies in Kenya. The specific objectives were to examine the effect of top teams diversity on competitive advantage, evaluate the effect of structural interdependence on the association between top manager diversity and competitive advantage, assess the effect of strategic orientation on the link between top management team diversity and competitive advantage and examine the combined effect of senior managers diversity, structural interdependence and strategic orientation on competitive advantage of insurance enterprises in Kenya. The research utilized a cross sectional survey to interrogate 41 insurance enterprises in Kenya and collected data from there top level executives aided by a questionnaire. Four hypotheses were examined using regression methods and the Baron and Kenny Model utilized to investigate the moderating effects of the variables. The research demonstrated that top management team diversity had a significant positive effect on competitive advantage (p = 0.001) which supported the upper echelon theory. The study also revealed that both structural interdependence and strategic orientation moderated the relationship between top manager diversity and competitive advantage with both their p values = 0.001. Top management team diversity, structural interdependence and strategic orientation displayed a significant combined effect on competitive advantage since each of the variables had a p value lower than 0.05. By deducing that top management team diversity was beneficial for firm competitiveness, the study provided evidence to boost this area of research. The study additionally revealed that strategic orientation and structural interdependence significantly enhanced the association between senior executives’ diversity and competitive advantage. The research findings thus supported the upper echelon, structural contingency and resource advantage theories. The study presented implications to practitioners tasked with selection and structuring of top-level executives in enterprises, which included embracing policies that enhance competitive advantage such as, intentionality in designing diverse teams. Additionally, the research highlighted the benefits of accommodating interdependence among units to boost team output and consideration of strategies that accord firms market competitiveness. The study had limitations presented by reliance on primary data that has the tendency of measurement errors. It recommended consideration of longitudinal research in future so that explanatory factors on variable relationships are exposed. It also recommended testing of the variables through different operationalization in varied setups.