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

Abstract

Small and growing businesses have been considered the primary forces for sustainable economic growth and rapid industrialization. Despite their extraordinary 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 assess the impact of strategic leadership on the 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 establish further the moderating role of the 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: strategic leadership theory, path-goal leadership theory, trait theory, performance maximization theory, and contingency theory. The study adopted both descriptive and explanatory research designs to satisfy these objectives. 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 the Yamane formula was used to compute the sample size of 318 SGBs. Primary data was collected from all the respondents that were selected for this study. 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. All ethical considerations were observed. The study achieved a response rate of 66%. The study found that strategic direction, human development, and organizational culture have a positive and significant effect on organizational performance with p values of 0.000, 0.025, and 0.019,respectively, while core competencies were found to have a positive but non-significant effect with a p-value being 0.053. The 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 of any organization as it leads to improved organizational performance. Future studies could consider adopting other aspects of strategic leadership besides strategic direction, core competencies, human capital development, and organizational culture. Future studies could also look at other variables that can moderate the relationship besides the external environmental factors. More so, this study focused on small and growing businesses; therefore, other researchers can adopt this study among large and established firms