BOARD DIVERSITY AND PERFORMANCE: EXPLORING THE MODERATING EFFECTS OF INNOVATION EFFORTS
Abstract
Purpose of the study: The purpose of this study was to examine the moderating effects of innovative efforts on the relationship between board diversity and performance.
Problem statement: The study was premised on the hypothesis that innovative efforts spearheaded by a diverse board is crucial for the organizational survival, performance and growth. This study tested the hypothesis that SACCO Boards taking cognizant of their vital role of safeguarding the interests of stakeholders by embracing innovative efforts will maintain good performance, ward off competition, and respond to the ever-changing market needs of their stakeholders.
Methodology: The study adopted descriptive cross-sectional and correlational research designs. Data was collected from 105 respondents from a sample size of 108 Deposit Taking Saccos in Kenya. A semi structured questionnaire was used to collect primary data. Descriptive and Inferential Analysis were conducted using R software.
Results of the study: The study revealed that board diversity has a statistically significant and positive effect on performance, while the moderating effect of innovative efforts is statistically insignificant but positive.
Conclusion and policy recommendation: The study take cognizant of the important role of diverse boards in improving organizational performance, whilst embracing innovative efforts. The study recommends the need to ensure that boards are diverse based on competency, qualifications and experiences and that innovative culture is an integral part of the organizational culture.
Keywords: Board diversity, Innovation Efforts, Performance, SACCOs, Kenya
References
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Abou-Moghli, A. A., Al Abdallah, G. M., & Al Muala, A. (2012). Impact of Innovation on Realizing Competitive Advantage in Banking Sector in Jordan. American Academic & Scholarly Research Journal, 4(5).
Auka, D.O., & Mwangi, J.K. (2013). Factors influencing Sacco customers’ decision to select other financial institutions in Kenya. International Review of Management and Business Research, 2(2), 610-626.
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Baron, R.M., & Kenny, A.D. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic and social considerations. Journal of Personality and Social Psychology, 51 (6), 1173-1182.
Bin Khidmat, W., Ayub Khan, M., & Ullah, H. (2020). The effect of board diversity on firm performance: Evidence from Chinese Listed Companies. Indian Journal of Corporate Governance, 13(1), 9–33.
Blattberg, C. (2004). Welfare: Towards the Patriotic Corporation. From Pluralist to Patriotic Politics: Putting Practice First. New York: Oxford University Press.
Bulankulama, S.W.G.K., & Khatibi, A. (2014). A theoretical approach to the competitive advantage moderating effects of strategies; innovation and IT. International Journal of Science and Research, 3(6), 1817-1820.
Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory [Abstract]. Administrative science quarterly, 50(2), 167-199.
Cheng, J. Y., & Groysberg, B. (2020). Gender diversity at the board level can mean innovation success. MIT Sloan Management Review; 61(2), 1-8.
Cooper, D., & Schindler, P. (2008). Business research methods (10th ed.). New York: McGraw-Hill/Irwin.
D’Emidio, T., Dorton, D., & Duncan, E. (2015). Service innovation in a digital world. Boston: McKinsey & Company.
Donaldson, T., & Preston, L.E. (1995). The Stakeholder Theory of the corporation: concepts, evidence, and implications. Academy of Management Review, 20(1), 65-91.
Easterby‐Smith, M., & Prieto, I. M. (2008). Dynamic capabilities and knowledge management: an integrative role for learning? British journal of management, 19(3), 235-249.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Farida, I., & Setiawan, D. (2022). Business strategies and competitive advantage: the role of performance and innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(3), 1-16.
Freeman, R.E. (1984). Strategic Management: A stakeholder Approach. Boston, MA: Pitman.
Hana, U. (2013). Competitive advantage achievement through innovation and knowledge. Journal of Competitiveness, 5(1), 82-96.
Helfat, C.E., Finkelstein, S., Mitchell, W., Peteraf, M.A., Singh, H., Teece, D.J., & Winter, S.G. (2007). Dynamic Capabilities: Understanding Strategic Change in Organizations: Blackwell, Malden, MA.
Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404-1427.
Introduction to SAS. UCLA: Statistical Consulting Group. from https://stats.oarc.ucla.edu/sas/modules/introduction-to-the-features-of-sas/ (accessed June 22, 2024).
Jensen, M., (2001). Value maximisation, stakeholder theory, and the corporate objective function. European financial management, 7(3), 297-317.
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Kenya National Bureau of Statistics (2019). Statistical Abstract. Nairobi: KNBS.
Khan, I., Khan, I., Khan, I. U., Suleman, S., & Ali, S. (2023). Board diversity on firm performance from resource-based view perspective: new evidence from Pakistan. International Journal of Productivity and Performance Management, Vol. ahead-of-print No. ahead-of-print. Retrieved August 10, 2023, from https://doi.org/10.1108/IJPPM-01-2022-0055
Kiambati, K.K., Ngugi, P., Katuse, P., & Waititu, A. (2013). Role of board size on financial performance of commercial banks. Prime Journal of Social Science, 2(3), 259-262.
Kithandi, C. K. (2022). Corporate governance and the financial performance of Deposit-Taking Savings and Credit Co-Operative Societies in Nairobi City County, Kenya. International Journal of Scientific and Research Publications, 12(10),685-691. DOI: 10.29322/IJSRP.12.10.2022.p13084
Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and Psychological Measurement, 30(3), 607–610.
Mansell, S. F. (2013). Capitalism, corporations and the social contract: A critique of stakeholder theory. Cambridge University Press.
Mlay, L. S., Temu, S. S., & Mataba, L. (2022). Influence of board attributes on board roles performance in Savings and Credit Co-operative Societies in Tanzania. Business Management Review, 25(1), 90–110.
Mlay, L., Temu, S., & Mataba, L. (2023). The impact of board characteristics on the financial performance of Savings and Credit Co-operative Societies in Arusha and Dar es Salaam, Tanzania. Tanzanian Economic Review, 13(1), 130-155.
Momanyi, E. M., Juma, D., & Kenyanya, P. N. (2023). Financial innovations and financial performance of Deposit-Taking SACCOs in Kenya. International Journal of Social Science and Humanities Research, 1(1), 525–538. https://doi.org/10.61108/ijsshr.v1i1.45
Monks, R. A., & Minow, N. (2011). Corporate governance. John Wiley & Sons.
Mugenda, O.M., & Mugenda, A.G. (1999). Research Methods: Quantitative and Qualitative Approaches. Nairobi: ACTS Press.
Mukanzi, C., & Mwai, C. W. (2020). Effect of service innovation on performance of deposit taking SACCOs in Western Kenya. The Strategic Journal of Business & Change Management, 7(3), 776 – 781.
Murage, J., Muya, J., & Mogwambo, V. (2018). Effects of interest rates on financial performance of deposit taking SACCOs in Kisii County, Kenya. International Journal of Social Sciences and Information Technology, Vol IV Issue X, 108-115.
OECD (2015). G20/OECD principles of corporate governance. Paris: OECD Publishing.
Otii, L. O., Lawrence, K., & Omondi, H. (2020). Technological innovation promoters, service quality practices and performance of SACCOs in Kenya: An integrative model. International Journal of Research in Business and Social Science, 9(4), 392–403. https://doi.org/10.20525/ijrbs.v9i4.785
Pahlevan, S.S., & Yeoh, K.K. (2014). Independent directors’ resource provision capability in publicly listed companies in Malaysia. Corporate ownership and control, 11(3), 113-121.
Pearce II, J.A., Robinson Jr, R., & Mital, A. (2008). Strategic Management: Formulation, Implementation and Control. New Delhi: Tata McGraw-Hill.
Pfeffer, J. (1972). Size and composition of corporate boards of directors: The organization and its environment. Administrative Science Quarterly, 17, 218—228.
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A Resource Dependence Perspective. New York: Harper & Row.
Pfeffer, J., & Salancik, G. R. (2003). The external control of organizations: A Resource Dependence Perspective, Stanford: Stanford University Press.
Porter, M. (1980). Competitive strategy - techniques for analysing industries and competitors. New York: The Free Press.
Porter, M. (1998). The Competitive Advantage of Nations. New York: The Free Press.
Quelhas, F. de C. (2021). The effect of innovation on the financial performance and export intensity of firms in emerging countries. Revista De Administração Da UFSM, 14, 1259–1279.
Rodriguez, M. A., Ricart, J. E., & Sánchez, P. (2002). Sustainable Development and the Sustainability of Competitive Advantage: A Dynamic and Sustainable View of the Firm. Creativity & Innovation Management, 11(3), 135-146.
Ryan, M. (2011). 5 Steps to Developing an Innovative Solution to a Problem. Retrieved October 7, 2021, from http://www.businessdictionary.com/article/728/innovative-companies-solve-problems-for-customers/.
SASRA (2014). Sacco Supervision Annual Report 2013 (Deposit Taking SACCOs). Nairobi, Kenya.
SASRA (2015). SACCO Supervision Annual Report 2014 (Deposit Taking SACCOs). Nairobi: SASRA.
SASRA (2018). SACCO Supervision Annual Report 2017 (Deposit Taking SACCOs). Nairobi: SASRA.
SASRA (2019). List of licensed and authorised Sacco societies in Kenya for the financial year ending 31st December 2019. Nairobi: SASRA.
Schumpeter, J. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.
Stock, G. N., Greis, N. P., & Fischer, W. A. (2002). Firm size and dynamic technological innovation. Technovation, 22(9), 537–549.
Teece, D., & Pisano, G. (1994). The dynamic capabilities of firms: an introduction. Industrial and Corporate Change, 3, 537–556.
Teece, D.J. (2007). Explicating dynamic capabilities: the nature and micro foundations of (sustainable) enterprise performance. Strategic Management Journal, 28(8), 1319–1350.
Vikiru, T., Guyo, W., Moronge, W., & Amuhaya, J. (2023). Financial governance and performance of Deposit Taking SACCOs in Kenya. International Journal of Recent Research in Social Sciences and Humanities, 10(3), 44-53. DOI: https://doi.org/10.5281/zenodo.8158919
Waithira, J.M., & Kinyua, G.M. (2020). Service differentiation and organization performance: an empirical analysis of Deposit Taking SACCOs in Nairobi City County, Kenya. Journal of Business and Economic Development, 5(2), 64-72.
Abou-Moghli, A. A., Al Abdallah, G. M., & Al Muala, A. (2012). Impact of Innovation on Realizing Competitive Advantage in Banking Sector in Jordan. American Academic & Scholarly Research Journal, 4(5).
Auka, D.O., & Mwangi, J.K. (2013). Factors influencing Sacco customers’ decision to select other financial institutions in Kenya. International Review of Management and Business Research, 2(2), 610-626.
Ayuso, S., & Argandona, A. (2007). Responsible corporate governance: Towards a stakeholder board of directors? IESE Business School working paper no 701.
Barbara, B., & Alberto, D. (2009). An empirical investigation of innovation determinants in food machinery enterprises. European Journal of Innovation Management, 12(2), 223 – 242.
Baron, R.M., & Kenny, A.D. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic and social considerations. Journal of Personality and Social Psychology, 51 (6), 1173-1182.
Bin Khidmat, W., Ayub Khan, M., & Ullah, H. (2020). The effect of board diversity on firm performance: Evidence from Chinese Listed Companies. Indian Journal of Corporate Governance, 13(1), 9–33.
Blattberg, C. (2004). Welfare: Towards the Patriotic Corporation. From Pluralist to Patriotic Politics: Putting Practice First. New York: Oxford University Press.
Bulankulama, S.W.G.K., & Khatibi, A. (2014). A theoretical approach to the competitive advantage moderating effects of strategies; innovation and IT. International Journal of Science and Research, 3(6), 1817-1820.
Casciaro, T., & Piskorski, M. J. (2005). Power imbalance, mutual dependence, and constraint absorption: A closer look at resource dependence theory [Abstract]. Administrative science quarterly, 50(2), 167-199.
Cheng, J. Y., & Groysberg, B. (2020). Gender diversity at the board level can mean innovation success. MIT Sloan Management Review; 61(2), 1-8.
Cooper, D., & Schindler, P. (2008). Business research methods (10th ed.). New York: McGraw-Hill/Irwin.
D’Emidio, T., Dorton, D., & Duncan, E. (2015). Service innovation in a digital world. Boston: McKinsey & Company.
Donaldson, T., & Preston, L.E. (1995). The Stakeholder Theory of the corporation: concepts, evidence, and implications. Academy of Management Review, 20(1), 65-91.
Easterby‐Smith, M., & Prieto, I. M. (2008). Dynamic capabilities and knowledge management: an integrative role for learning? British journal of management, 19(3), 235-249.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301-325.
Farida, I., & Setiawan, D. (2022). Business strategies and competitive advantage: the role of performance and innovation. Journal of Open Innovation: Technology, Market, and Complexity, 8(3), 1-16.
Freeman, R.E. (1984). Strategic Management: A stakeholder Approach. Boston, MA: Pitman.
Hana, U. (2013). Competitive advantage achievement through innovation and knowledge. Journal of Competitiveness, 5(1), 82-96.
Helfat, C.E., Finkelstein, S., Mitchell, W., Peteraf, M.A., Singh, H., Teece, D.J., & Winter, S.G. (2007). Dynamic Capabilities: Understanding Strategic Change in Organizations: Blackwell, Malden, MA.
Hillman, A. J., Withers, M. C., & Collins, B. J. (2009). Resource dependence theory: A review. Journal of Management, 35(6), 1404-1427.
Introduction to SAS. UCLA: Statistical Consulting Group. from https://stats.oarc.ucla.edu/sas/modules/introduction-to-the-features-of-sas/ (accessed June 22, 2024).
Jensen, M., (2001). Value maximisation, stakeholder theory, and the corporate objective function. European financial management, 7(3), 297-317.
Johnson, B. L., (1995). Resource Dependence Theory: A political economy model of organizations. Utah: University of Utah
Kenya National Bureau of Statistics (2019). Statistical Abstract. Nairobi: KNBS.
Khan, I., Khan, I., Khan, I. U., Suleman, S., & Ali, S. (2023). Board diversity on firm performance from resource-based view perspective: new evidence from Pakistan. International Journal of Productivity and Performance Management, Vol. ahead-of-print No. ahead-of-print. Retrieved August 10, 2023, from https://doi.org/10.1108/IJPPM-01-2022-0055
Kiambati, K.K., Ngugi, P., Katuse, P., & Waititu, A. (2013). Role of board size on financial performance of commercial banks. Prime Journal of Social Science, 2(3), 259-262.
Kithandi, C. K. (2022). Corporate governance and the financial performance of Deposit-Taking Savings and Credit Co-Operative Societies in Nairobi City County, Kenya. International Journal of Scientific and Research Publications, 12(10),685-691. DOI: 10.29322/IJSRP.12.10.2022.p13084
Krejcie, R. V., & Morgan, D. W. (1970). Determining sample size for research activities. Educational and Psychological Measurement, 30(3), 607–610.
Mansell, S. F. (2013). Capitalism, corporations and the social contract: A critique of stakeholder theory. Cambridge University Press.
Mlay, L. S., Temu, S. S., & Mataba, L. (2022). Influence of board attributes on board roles performance in Savings and Credit Co-operative Societies in Tanzania. Business Management Review, 25(1), 90–110.
Mlay, L., Temu, S., & Mataba, L. (2023). The impact of board characteristics on the financial performance of Savings and Credit Co-operative Societies in Arusha and Dar es Salaam, Tanzania. Tanzanian Economic Review, 13(1), 130-155.
Momanyi, E. M., Juma, D., & Kenyanya, P. N. (2023). Financial innovations and financial performance of Deposit-Taking SACCOs in Kenya. International Journal of Social Science and Humanities Research, 1(1), 525–538. https://doi.org/10.61108/ijsshr.v1i1.45
Monks, R. A., & Minow, N. (2011). Corporate governance. John Wiley & Sons.
Mugenda, O.M., & Mugenda, A.G. (1999). Research Methods: Quantitative and Qualitative Approaches. Nairobi: ACTS Press.
Mukanzi, C., & Mwai, C. W. (2020). Effect of service innovation on performance of deposit taking SACCOs in Western Kenya. The Strategic Journal of Business & Change Management, 7(3), 776 – 781.
Murage, J., Muya, J., & Mogwambo, V. (2018). Effects of interest rates on financial performance of deposit taking SACCOs in Kisii County, Kenya. International Journal of Social Sciences and Information Technology, Vol IV Issue X, 108-115.
OECD (2015). G20/OECD principles of corporate governance. Paris: OECD Publishing.
Otii, L. O., Lawrence, K., & Omondi, H. (2020). Technological innovation promoters, service quality practices and performance of SACCOs in Kenya: An integrative model. International Journal of Research in Business and Social Science, 9(4), 392–403. https://doi.org/10.20525/ijrbs.v9i4.785
Pahlevan, S.S., & Yeoh, K.K. (2014). Independent directors’ resource provision capability in publicly listed companies in Malaysia. Corporate ownership and control, 11(3), 113-121.
Pearce II, J.A., Robinson Jr, R., & Mital, A. (2008). Strategic Management: Formulation, Implementation and Control. New Delhi: Tata McGraw-Hill.
Pfeffer, J. (1972). Size and composition of corporate boards of directors: The organization and its environment. Administrative Science Quarterly, 17, 218—228.
Pfeffer, J., & Salancik, G. R. (1978). The external control of organizations: A Resource Dependence Perspective. New York: Harper & Row.
Pfeffer, J., & Salancik, G. R. (2003). The external control of organizations: A Resource Dependence Perspective, Stanford: Stanford University Press.
Porter, M. (1980). Competitive strategy - techniques for analysing industries and competitors. New York: The Free Press.
Porter, M. (1998). The Competitive Advantage of Nations. New York: The Free Press.
Quelhas, F. de C. (2021). The effect of innovation on the financial performance and export intensity of firms in emerging countries. Revista De Administração Da UFSM, 14, 1259–1279.
Rodriguez, M. A., Ricart, J. E., & Sánchez, P. (2002). Sustainable Development and the Sustainability of Competitive Advantage: A Dynamic and Sustainable View of the Firm. Creativity & Innovation Management, 11(3), 135-146.
Ryan, M. (2011). 5 Steps to Developing an Innovative Solution to a Problem. Retrieved October 7, 2021, from http://www.businessdictionary.com/article/728/innovative-companies-solve-problems-for-customers/.
SASRA (2014). Sacco Supervision Annual Report 2013 (Deposit Taking SACCOs). Nairobi, Kenya.
SASRA (2015). SACCO Supervision Annual Report 2014 (Deposit Taking SACCOs). Nairobi: SASRA.
SASRA (2018). SACCO Supervision Annual Report 2017 (Deposit Taking SACCOs). Nairobi: SASRA.
SASRA (2019). List of licensed and authorised Sacco societies in Kenya for the financial year ending 31st December 2019. Nairobi: SASRA.
Schumpeter, J. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.
Stock, G. N., Greis, N. P., & Fischer, W. A. (2002). Firm size and dynamic technological innovation. Technovation, 22(9), 537–549.
Teece, D., & Pisano, G. (1994). The dynamic capabilities of firms: an introduction. Industrial and Corporate Change, 3, 537–556.
Teece, D.J. (2007). Explicating dynamic capabilities: the nature and micro foundations of (sustainable) enterprise performance. Strategic Management Journal, 28(8), 1319–1350.
Vikiru, T., Guyo, W., Moronge, W., & Amuhaya, J. (2023). Financial governance and performance of Deposit Taking SACCOs in Kenya. International Journal of Recent Research in Social Sciences and Humanities, 10(3), 44-53. DOI: https://doi.org/10.5281/zenodo.8158919
Waithira, J.M., & Kinyua, G.M. (2020). Service differentiation and organization performance: an empirical analysis of Deposit Taking SACCOs in Nairobi City County, Kenya. Journal of Business and Economic Development, 5(2), 64-72.
Published
2024-08-05
How to Cite
Mucee, N. D., & Aketch, N. E. (2024). BOARD DIVERSITY AND PERFORMANCE: EXPLORING THE MODERATING EFFECTS OF INNOVATION EFFORTS. African Journal of Emerging Issues, 6(12), 124 - 142. Retrieved from https://ajoeijournals.org/sys/index.php/ajoei/article/view/652
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