Serial Mediation Effect of Firm Size and Dynamic Capabilities on the Relationship Between Leadership Style 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 different leadership styles on Competitive Advantage with mixed findings, therefore, requiring the inclusion of moderating or mediating variables. The purpose of this study is to establish the serial mediating effect of Firm Size (FSZ) and Dynamic Capability (DC) on the relationship between Leadership Style (LS) and Competitive Advantage (CA). The specific objectives were to assess the effect of Leadership Style and Dynamic Capabilities on Competitive Advantage, to establish the effect of Leadership Style on Firm Size, and to establish the mediating effect of Firm Size on the relationship between Leadership Style 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 LS (β=.419 and LLCI = .323, ULCI = .516), FSZ (β=.23 and LLC I = .138, ULCI = .330) significantly influenced CA. Additionally, LS (β=.635 and LLCI = .554, ULCI = .716) has a significant effect on FSZ. The results further showed that FSZ mediated the relationship between LS and CA (β=.148, Boot LLCL =. 073 and Boot ULCI= .218). In conclusion, the study established that Firm Size mediated the relationship between Leadership and Competitive Advantage. The findings clarify the alignment of Firm Size with CA for manufacturing firms in Kenya. Therefore, managers should be cognizant of the size of the firm which influences the abilities of the firms to attain Competitive Advantage.