The Influence of the External Environment on the Performance of Publicly Quoted Companies in Kenya

Abstract

This study investigated the effect of the external environment on corporate performance. Based on a survey of 23 companies listed on the Nairobi Stock Exchange, three environmental dimensions of complexity, dynamism and munificence were used to describe Kenya’s business environment. Performance implications of these environmental dimensions were then examined. The study reports that for the surveyed companies, varying degrees of external environmental complexity, dynamism, and munificence exist which tend to be mostly manifested in economic factors, competitive rivalry, market factors, technological factors, regulatory factors as well as threat of new entrants. Consequently, these factors appeared to have great influence in the companies’ strategic decision making. However, the overall results for the effect of external environment on corporate performance were statistically not significant. Based on the findings, implications of the study and suggestions for further study are presented.