Transcript ENTREPRENEURIAL PERSONALITY

Resources, Innovation and
Performance of Insurance Companies
in Kenya
Dr. Beatrice Ombaka, PhD.
Dr.Vincent Machuki, PhD.
Introduction and Motivation
 Variation in firm performance remains unexplained
even in firms in the same industry.
 This has inconclusively been attributed to resources
(Barney, 1986; Barney, 1991; Amit and Schoemaker,
1993).
 Firms in the same industry perform differently
because they differ in resources and capabilities they
control
even
in
equilibrium
(Amit
and
Schoemaker,1993)
 Resources are important for firm performance (Barney
1991; Amit and Schoemaker,1993).
 However, resources alone can not explain variation in
performance.
 Role of other variables, key among them innovation.
 Innovation is a crucial source of competitive
advantage and survival in a given dynamic
environment (Dess and Picken, 2000).
 The study was anchored in RBT (Barney, 1991) DCT
(Teece, Pisano and Shuen, 1997) and KBT
(Michailova and Hutchings, 2006).
 A review of related studies on organizational
resources, innovation, and performance revealed gaps
along conceptual and contextual fronts.
 This study therefore sought to shed light on the
interrelationships between resources, innovation and
performance of insurance companies in Kenya.
 Kenyan insurance industry is important in the
economy and performance of players in the industry is
critical more especially towards the realization of the
Kenya Vision 2030.
 Resources owned by a firm can be configured through
innovation in a dynamic environment to improve firm
performance.
 Performance is the main reason firms exist and should
be focused on fulfilling all the constituents needs and
not just shareholders.
 Financial measures have limitations.
 Use of comprehensive performance measurement
approaches
 BSC (Kaplan and Norton,1992); SBSC (Hubbard,2009)
LITERATURE REVIEW
 Resources a firm owns and controls are considered as
determinants of superior firm performance.
 Resources can be tangible or intangible
 Intangible resources are thought to be valuable, rare and
difficult to imitate leading to a SCA (Barney, 1991).
 Evolutionary theories (Nelson and Winter, 1982) suggest
that firms with a strong commitment to research and
development and learning will experience a higher growth
rate.
Literature Review
 Innovation is considered the ability to respond to
changes in the external environment.
 Dess and Picken (2000) argue that innovation is a
crucial source of competitive advantage and survival
in a given dynamic environment.
 Cucculelli and Ermini (2012) found that product
development promotes growth of firms.
 Other researchers have found that availability of
financial resources can expand a firm’s capacity to
support its innovative activities (Lee et al., 2001).
 The presence of different organizational resources and
capabilities positively affects the outcome of the
innovation process.
Hypotheses
 Resources have a significant influence on
firm performance.
 Innovation has a significant intervening
influence on the relationship between
resources and firm performance.
Research Methods
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Philosophy: Positivistic
Design: Cross sectional survey
Population: Census -All the 46 insurance companies
Data collection: Primary and Secondary data
Instruments: Questionnaire, Interview guide, Document
review
Reliability: all items had Cronbach’s alpha coefficient of
.70+
Respondents: CEO or designated officer
Unit of analysis: Organization
Analysis: descriptive , regression.
Response rate- 69.5%
Findings
I. Resources and Firm Performance
a. Tangible resources and firm performance.
 The study reported statistically significant influence of tangible
resources on premium, internal business processes, environment
aspect and CSR.
 Statistically not significant results were observed for profit,
customer perspective and learning and growth.
 This indicated that, tangible resources significantly influence
premium but do not significantly influence profit.
 Conversely, when the composite index of tangible resources was
regressed on the composite of non-financial performance
measure, the results indicated an R2 of 0.193 which was lower as
compared to the R2 of some of the individual effect results.
 This was an indicator that individually, tangible resources had a
higher contribution to non-financial performance than when
combined.
b. Intangible resources on firm performance
 The results indicated statistically not significant results for the
individual effects of intangible resources on the non-financial
performance indicators except for internal business processes
and corporate social responsibility.
 However, when the composite index for intangible resources
was regressed on the composite index of non-financial
performance, the study established statistically significant
influence of intangible resources on non-financial
performance.
 This means that the various attributes of intangible resources
may not have a significant effect on non-financial
performance as individual variables.
 However, in combination, they had a significant influence.
 Below are the findings for the influence of intangible
resources on various performance indicators.
Intervening influence of innovation on the relationship
between resources and firm performance
 The results reported a statistically significant intervening
influence of innovation on the relationship between
organizational resources and non-financial performance of
insurance companies in Kenya.
 Resources alone accounted for 34.4 variation in non financial
performance. Resources together with innovation accounted
for 59.1 variation in non financial firm performance.
 The results suggest that in the presence of innovation,
organizational resources will enhance the performance of
insurance companies in Kenya.
 These results support the RBT and DCT views that the
reconfiguration of resources in to firm specific assets and
processes will enhance firm performance because the total
effect cannot be duplicated by other firms.
Conclusion
 Resources and innovation have a high explanatory
power on firm performance
 Theoretical implications
 Strengthening RBT and DCT
 Influence of specific resources on performance
 Innovation is key to superior firm performance
 Implications on Practice
 Strengthen Research and Development
 Focus on key drivers of performance
Conclusion
• Implications on Policy
• Improved performance in insurance firms will help achieve
Kenya Vision 2030.
• R&D of new products will lead to increased insurance
penetration leading to improved performance.
• Recommendations
• Innovation department in all insurance companies.
END