Mediating Role of Human Resource Management System on the Relationship between Transformational Leadership and Competitive Advantage of Manufacturing Firms in Kenya

Abstract

Competitive advantage plays a significant role in developing and accomplishing organizational goals. However, some of the organizations are struggling to attain a competitive cutting edge against competitors. Previous studies have been done on the effect of transformational leadership on competitive advantage with mixed findings, therefore, requiring the inclusion of moderating or mediating variables. The purpose of this study is to establish the mediating role of Human Resource Management System (HRMS) on the relationship between Transformational leadership (TL) and Competitive Advantage (CA). The specific objectives were to assess the effect of Transformational Leadership and Human Resource Management System on Competitive Advantage, to establish the effect of Transformational Leadership on Human Resource Management System, to establish the mediating effect of Human Resource Management System on the relationship between Transformational Leadership and Competitive Advantage. The study was guided by the Resource Based View, Porter’s Generic Strategy of Competitive Advantage, Five Forces of Competitive Position and Capability Based View Theories. A positivism paradigm and explanatory research design were used. A sample size of 400 out of 795 manufacturing firms registered by Kenya Association of Manufacturers (KAM) and operating in Nairobi County, Kenya was obtained using Yamane’s formula. Data was collected using a close-ended questionnaire and analyzed using descriptive statistics including mean, standard deviations and inferential that is correlation and Hierarchical Regression analysis. Further, Hayes Model 6 was used to test the mediations and mediation hypotheses: The results showed that TL (β=.419 and LLCI = .323, ULCI = .516), HRMs (β=.23 and LLC I = .138, ULCI = .330) significantly influenced CA. Additionally, TL (β=.635 and LLCI = .554, ULCI = .716) has a significant effect on HRMs. The results further showed that HRMs mediated the relationship between TL and CA (β=.148, Boot LLCL =. 073 and Boot ULCI= .218). In conclusion, the study established that Human Resource Management mediated the relationship between Transformational Leadership and Competitive Advantage. The findings clarify the alignment of HRMS with CA for manufacturing firms in Kenya. Therefore, managers should develop a strong HRMS, which can affect the abilities of the firms to attain Competitive Advantage. The study recommends that; CEOs need to develop desirable implement policies that enhance a Job- based HRMs, a culture of continuous training of employees’, professionalism practices and produce distinct and high quality products and services to meet customer needs and preferences. Further, that firm’s leadership should enhance critical thinking to adapt to technological changes in the unstable environment.