Influence of Managerial Cognition on Firm Performance of Textile and Leather Firms in Kenya: Moderating Role of Competitive Dynamics

Abstract

There continues to be growing interest in the organizational performance. This has led organizations to make great efforts to attain satisfactory performance in order to satisfy the needs of their stakeholders. In Kenya, the contribution of the manufacturing sector which includes textile and leather, the GDP has been decreasing since 2015 from 9.4% to 7.5% yet it is one of the sectors that are expected to bring about shared prosperity of citizens by positively impacting the economy. Managerial Cognition can play a key role in strategy formulation, execution and control in order to ensure satisfactory performance in this sector in a highly competitive business environment. However, empirical evidence on the influence of Managerial Cognition on performance of organizations and how Competitive Dynamics affect this relationship is scarce. Specifically, empirical literature on the influence of Managerial Cognition comprising salience, regulatory focus, identity domain, and external/internal orientation on performance is limited. Drawing from the Resource Based View, Upper Echelon’s Theory, Social Cognition Theory and Competitive Dynamics Framework the relationship between Managerial Cognition and performance and the moderating effect of Competitive Dynamics was examined in 104 firms in the textile and leather (and footwear) manufacturing firms in Kenya. These were studied through a descriptive cross- sectional survey where data was collected using structured questionnaires. Prior to data collection, a pilot test of the questionnaire was conducted on top ten managers and allied firms. Cronbach Alpha established the reliability. At least three of the top managers from each of the 104 firms were requested to fill the questionnaires because their cognitions vary. A total of 163 responses representing 53% response rate was achieved. Since the data on the dependent variable were ordinal, a Logistic Regression was used to examine the direct and moderated effects. Salience and internal/external orientation significantly influenced the odds of performance (Salience: Wald = 5.219, p = .022 < .05, Odds ratio = 2.217; internal/external orientation: Wald =12.318, p <.001 <.05, Odds ratio = 4.101). However, regulatory focus (Wald = 1.093, p > .05, Odds ratio = 1.357) and identity (Wald = 2.739, p > .05, Odds ratio = 1.805) did not significantly increase the odds for performance of leather and textile firms. Salience increased the odds for performance by more than two folds (odds ratio = 2.217) while internal/external orientation increased the odds by 4.401 times (odds ratio = 4.101). These findings clarify the Managerial Cognition disposition, and its influence on firm performance and how Competitive Dynamics affect this relation. The findings will guide policy and practice in the textile and leather manufacturing sub-sector in Kenya.