Strategic Leadership, External Environment, and Performance of Small and Growing Businesses in Nairobi County, Kenya

Abstract

Small and growing businesses are considered as the primary forces for sustainable economic growth and rapid industrialization. Despite their great potential, small and growing businesses face many challenges and as a result, most of them perform dismally and are eventually edged out by competitors. Given the studies done which recognize the role of strategic leadership practices on performance, the present leaders of small and growing businesses are viewed not only to be steering their companies through the process of strategic planning, mission development, and evaluation, but also to actively handle strategic leadership practices and firm performance. The overall objective of the study was to explore the impact of strategic leadership on performance of small and growing businesses in Nairobi County. The specific objectives of the study were to determine the influence of strategic direction, core competencies, human capital development and sustaining organizational culture on the performance of small and growing businesses in Nairobi County and to further establish the moderating role of operating environment on the relationship between strategic leadership and performance of small and growing businesses in Nairobi County. This research was based on five theories namely: strategic leadership theory, path-goal leadership theory, trait theory, performance maximization theory and contingency theory. To satisfy these objectives, both descriptive and explanatory research design were adopted. The population of this study was all the 1539 small and growing businesses in Nairobi County’s Central Business District. Stratified random sampling was used as the sampling design while Yamane formula was used to compute the sample size of 318 SGBs. A self-administered questionnaire was used as the major tool for data collection. Both Google forms and hard copy questionnaires were used to collect data. The questionnaire consisted of three sections focusing on general information about the respondent and the organization, strategic leadership and actions that are geared towards performance and finally the level of organizational performance. Descriptive and inferential statistics were utilized for data analysis purposes. The study achieved a response rate of 66%. The study found that strategic direction, human development, and organizational culture have positive and significant effect on organizational performance with p values 0.000, 0.025 and 0.019 respectively while core competencies were found to have a positive but non-significant effect with p value being 0.053. External environment was also found to have a significant moderating effect on the relationship between strategic leadership and organizational performance. The study concluded that strategic leadership is an important aspect in any organization as it leads to improved organizational performance. Keywords: Strategic Leadership, External Environment, Small and Growing Businesses, Strategic Direction, Core competencies, Human Capital Development, Sustaining Organizational Culture