Organizational Culture, Marketing Capabilities, Market Orientation, Industry Competition and Performance of Microfinance Institutions in Kenya

Abstract

The broad objective of this study was to assess the influence of organizational culture, marketing capabilities, market orientation and industry competition on performance of microfinance institutions in Kenya. Seven specific objectives were pursued to determine direct and indirect relationships among organizational culture, marketing capabilities, market orientation, industry competition and firm performance. Seven hypotheses were formulated based on the specific objectives of the study. The hypotheses were tested through regression analysis. The population of the study comprised all microfinance institutions that were members of the Association of Microfinance Institutions (AMFI) in Kenya. A descriptive cross-sectional survey was used. Secondary data were collected from annual industry performance reports by AMFI. Primary data were collected through structured questionnaire. Data were analyzed through descriptive statistics, contingency tables, Chi-square tests, factor analysis and regression analysis. Results of Cronbach’s alpha test confirmed reliability of all the measurement scales used in the study. Results revealed that the influence of organizational culture was stronger on non financial performance than financial performance. The results also revealed that marketing capabilities had strong statistical predictability of firm performance. It was established that industry competition had weak influence on firm performance. Finally, the joint moderating influence of industry competition and marketing capabilities as well as the mediating influence of market orientation on the relationship between organizational culture and performance were established. Findings of the study had implications for theory and policy. The study clarified the strength of influence of marketing capabilities on firm performance. The findings showed that product capability has the greatest explanatory power on firm performance. In addition, the study further explained the indirect influence of market orientation on the relationship between organizational culture and performance. In addition, the study supported findings of previous studies on the influence of competition and firm performance. It was concluded that organizational culture and product capability strongly influence performance outcomes in the microfinance industry. However, the study had a number of limitations. The crosssectional research design could not measure changes in organizational culture and performance over time. In addition, structured survey instrument could not reveal all cultural values, behaviours and attitude of organization members. Finally, collection of data from top management limits scope of interpretation of findings. Results could have been different if employees at different hierarchical levels of the organization were involved in the study. Based on the limitations of the study, it was recommended that future studies should adopt longitudinal research design to assess changes in organizational culture and performance over time. In addition, future studies need to use mixed methods approach involving both qualitative and quantitative designs in the study of organizational culture. Further, to capture representative view of organization, future studies need to sample respondents at different levels of organizational hierarchy.