CEO ATTRIBUTES, SOCIAL CAPITAL AND COMPETITIVE ADVANTAGE OF COMMERCIAL BANKS IN KENYA

Noah Chepkech, Doris Mbugua, Kimani E. Maina

Abstract


Competitive advantage is the unique combination of elements within the business model which enables a firm to better satisfy the needs in its environment, earning economic rents in the process. The objective of this study was to evaluate the mediating effect of social capital on the relationship between CEO Attributes and competitive advantage of commercial banks in Kenya. Few commercial banks in Kenya especially tier one banks have gained competitive advantage compared to their peers in tier 2 and tier 3. Some tier 2 and 3 banks have experienced sudden unexpected systemic collapse with a number of mergers and buyoff ensuing. Some studies have attributed the lack of competitive advantage in Kenyan commercial banks to violation of banking laws such as lacking the right CEO Attributes. Other studies done on the effect of CEO Attributes on competitive advantage have shown varying contradictory findings. This study postulates that social capital could be playing a mediating role in the nexus between CEO Attributes and competitive advantage. The study was guided by stewardship theory. The research adopted descriptive as well as correlational research designs. Target population for this research comprised the forty-two commercial banks operating in Kenya while the respondents were heads of corporate departments of these banks. The research approach was census survey which covered all the elements in the target population. Questionnaire was the tool of data collection. Reliability of the questionnaire was confirmed using Cronbach alpha. A reliability coefficient of 0.7 and above is the rule of thumb and was used as benchmark for approving the reliability of the instruments. SPSS was used to aid in data analysis. Data analysis of collected data involved a combination of descriptive and inferential statistics. Multiple regression analysis as well as Pearson product moment correlation analysis was utilized to test the nexus between the independent variables and the dependent variable. The variables were regressed using 5% significance level to find out the strength of the variables and direction of their relationship. Study results indicated statistically significant results between CEO attributes (β =0.282; t=5.745; p=0.000) and competitive advantage. Furthermore, the study showed that social capital had a significant mediating effect on the relationship between CEO attributes and competitive advantage (indirect effect=0.295; LLCI=0.218, ULCI=0.376). Total effect of board diversity in the presence of social capital on competitive advantage is 0.577 (t=11.046, p=0.000). The study recommends that commercial banks should employ a CEO with the right attributes while simultaneously embracing social capital to achieve maximum competitive advantage.

Keywords: Competitive Advantage, CEO Attribute’s, Social Capital


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