Firm Level Factors and International Performance of Companies Listed on the Nairobi Securities Exchange

Abstract

The determinants of international success have always been an issue of importance in international business research. Firm level analysis enhances the understanding of how firms compete in the international market place and what factors influence their relative success. Given the liability of foreignness and the risks and costs associated with doing business in foreign countries, researchers and practitioners have sought to establish how best to successfully utilise and deploy resources and capabilities, thereby contributing to success in international markets and enhancing firm international performance. Building on existing theoretical frameworks and literature, this research offers a firm level analysis of international performance antecedents for developing economy firms. This study draws on a multidisciplinary integrated Kenyan firm international performance framework that extends internationalisation theory, the resource based view and institutional theory and aspects of their relevant extensions in order to investigate the effect of firm level factors on international performance. Specifically, the research focused on the effect of institutional capital, management characteristics, organisational demographics, firm capabilities, internationalisation orientation and degree of internationalisation on firm international performance. The firm capabilities studied were organisational innovation intensity, knowledge capability and adaptive capability. This research adopted a quantitative approach based on a cross-sectional study of publicly quoted companies in Kenya. A semi structured questionnaire was administered for data collection. Structural equation modelling - Partial Least Squares analysis was used to analyse the survey responses and to test the hypotheses. The structural model showed good fit and possessed good reliability and convergent and discriminant validity and the results supported to a great extent the developed and predicted model. The analysis revealed that institutional capital, management characteristics, firm size, organisational innovation intensity and internationalisation orientation were significant predictors of firm international performance. The results indicated that institutional capital and management characteristics have a positive and significant effect on firm capabilities. Additionally, it was also found that the level of firm capabilities influences the effect of institutional capital on international performance. The level of international expansion, measured as the degree of internationalisation was found to influence the effect of firm capabilities on the international performance of a firm as relates to organisational innovation intensity but not for knowledge and adaptive capability. The results also indicate that the internationalisation orientation of a firm moderates the effect of organisation innovation intensity on international performance and the effect of knowledge capability on degree of internationalisation of a firm. These research findings provide information to developing market firms operating in the international market place, and offers insights to management and policy makers by answering the question, "What are the relative effects of firm level factors on the international performance of publicly quoted companies in Kenya?" The outcomes of the study contributes new perspectives to the existing body of developing economy international business literature and suggests directions for future research, while offering implications for academia, management and policy makers.