THE IMPACT OF CORPORATE ENTREPRENEURSHIP ON FINANCIAL PERFORMANCE OF FIRMS: EVIDENCE FROM KENYA S BANKING INDUSTRY.

Transcription

1 THE IMPACT OF CORPORATE ENTREPRENEURSHIP ON FINANCIAL PERFORMANCE OF FIRMS: EVIDENCE FROM KENYA S BANKING INDUSTRY. BY GICHURE SAMMY NJOROGE UNITED STATES INTERNATIONAL UNIVERSITY SPRING 2015

2 THE IMPACT OF CORPORATE ENTREPRENEURSHIP ON FINANCIAL PERFORMANCE OF FIRMS: EVIDENCE FROM KENYA S BANKING INDUSTRY BY GICHURE SAMMY NJOROGE A Project Report Submitted to the Chandaria School of Business in Partial Fulfillment of the Requirement for the Degree of Masters in Business Administration (MBA) UNITED STATES INTERNATIONALUNIVERSITY - AFRICA SPRING 2015

3 STUDENT S DECLARATION I, the undersigned, declare that this is my original work and has not been submitted to any other college, institution or university other than the United States International University in Nairobi for academic credit. Signed: Date: Gichure Sammy Njoroge (ID ) This project has been presented for examination with my approval as the appointed supervisor. Signed: Date: Scott Bellows Signed: Date: Dean, School of Business ii

4 COPYRIGHT No part of this project may be produced or transmitted in any form or by any means without prior written permission from the author. By Sammy Njoroge, 2015 iii

5 ABSTRACT The aim of this study is to determine the impact of corporate entrepreneurship on financial performance of commercial banks in Kenya. The study will examine five sub-dimensions of corporate entrepreneurship; innovation, risk taking, pro-activeness, competitive aggressiveness and autonomy. These five sub-dimensions of corporate entrepreneurship formed the basis of the research questions. They are: What effect does innovation have on perceived financial performance of commercial banks in Kenya? What effect does risk taking have on perceived financial performance of commercial banks in Kenya? Which has a greater impact on the perceived financial performance of commercial banks in Kenya; proactiveness, competitive aggressiveness or autonomy? The research study was quantitative and data was collected from 44 commercial banks in Kenya through closed-ended questionnaires. The questionnaires entail assessing the degree of corporate entrepreneurship in an organization in relation to its performance. The data collected was entered into a computer application package (SPSS) to quantitatively analyze the data both in terms of descriptive statistics and inferential statistics. Descriptive statistics include frequencies, measures of central tendencies (mean) and measures of dispersion (standard deviation, variance). Inferential statistics include correlation and regression. The data was then presented using tables and pie charts for clarity and ease of understanding. The findings of the research indicate that there is a strong positive association between level of corporate entrepreneurship and financial performance of a firm. Specifically innovation, risk taking, pro-activeness, competitive aggressiveness and autonomy were all found to have a positive effect on a firm s financial performance. Therefore it is observed that, innovations carried out by banks do have a major influence on their financial performance. Risk taking too has a positive impact on financial performance of banks and finally among the three (proactiveness, competitive aggressiveness and autonomy) competitive aggressiveness had the greatest impact on financial performance of banks followed by autonomy and pro-activeness respectively. iv

6 Conclusion drawn from the research findings indicate that most banks studied were innovative, risk takers, pro-active, autonomous and competitive aggressive. These entrepreneurial behaviors within banks were observed to lead to high levels of performance and profitability. These findings do match other studies that hypothesized a positive association between corporate entrepreneurship and financial performance of a firm. Recommendations to senior executives, directors and management are depicted and they are aimed at giving direction and guidelines on which parts of corporate activities financial institutions need to focus on in order to become more entrepreneurially orientated. Further, future research should test CE dimensions in other industries such as (manufacturing sector, insurance sector etc.). This will allow for comparisons between industries. The increased number and variety of industries could provide the opportunity to identify a number of different industry factors that affect financial performance. v

7 ACKNOWLEDGEMENT Sincere appreciation goes out to those who have contributed to the completion of this research paper as well as the entire degree program. Above all, I acknowledge the Almighty God for guiding me and giving me strength. Special thanks to my supervisor, Mr. Scott Bellows for his valuable guidance, readiness to assist and constructive criticism in this research. I also appreciate my family, friends and colleagues for their encouragement, help and support. vi

8 TABLE OF CONTENTS 1.0 INTRODUCTION 1.1 Background of the Problem Statement of the Problem Purpose of the Study Research Questions Significance of the Study Scope of the Study Definition of Terms Chapter Summary LITERATURE REVIEW 2.1 Introduction Innovation Risk Taking Pro-activeness Competitive Aggressiveness Autonomy Financial Performance Why Organizations need Corporate Entrepreneurship Corporate Entrepreneurship Triggers Corporate Entrepreneurship Barriers Chapter Summary RESEARCH METHODOLOGY 3.1 Introduction Research Design Population and Sampling Design Data Collection Method Research Procedures 27 vii

9 3.6 Data Analysis Methods Chapter Summary RESULTS AND FINDINGS 4.1 Introduction General Information Level of Banks Innovativeness and how it affects Financial Performance Risk taking influence on a Bank s profitability Pro-activeness Influence on a Bank s Financial Performance Impact of Competitive Aggressiveness on a Bank s Financial Performance Autonomy and its Impact on a Bank s Financial Performance Corporate Entrepreneurship Dimensions Impact on Financial Performance Perceived Financial Performance of Banks Chapter Summary DISCUSSION, CONCLUSIONS AND RECOMMENDATIONS 5.1 Introduction Summary Discussion Conclusions Recommendations References APPENDIX 1 COVER LETTER APPENDIX II QUESTIONNAIRE APPENDIX II I COMMERCIAL BANKS DIRECTORY 71 viii

10 LIST OF TABLES Page Table 4.1: Response Rate 29 Table 4.2: Number of Years Spent in the Organization 30 Table 4.3: Descriptive statistics on a Bank s level of Innovation 31 Table 4.4 Correlation between Innovation and Financial Performance 32 Table 4.5 Regression Analysis Innovation and Financial Performance 33 Table 4.6 Descriptive Statistics on a Bank s level of Risk Taking 34 Table 4.7 Correlations -Level of Risk Taking &Financial Performance 35 Table 4.8 Regression Analysis Risk taking and Financial Performance 36 Table 4.9 Descriptive Statistics on a Bank s level of Pro-activeness 37 Table 4.10: Correlation between Pro-activeness and Financial Performance 38 Table 4.11: Regression Analysis- Financial Performance and Pro-activeness 39 Table 4.12 Descriptive Statistics on a Bank s level of Competitive Aggressiveness 40 Table 4.13: Correlation- Competitive aggressiveness and Financial Performance 41 Table 4.14: Regression Analysis - Financial Performance / Compe aggressiveness 42 Table 4.15 Descriptive Statistics on a Bank s level of Autonomy 43 Table 4.16: Correlation between Autonomy and Financial Performance 44 Table 4.17: Regression Analysis- Financial Performance/ Autonomy 45 Table 4.18: CE Dimensions and their Correlation to Financial Performance 46 Table 4.19 Multiple Regression Analysis Financial Performance and CE 47 Table 4.20: Descriptive Statistics on a Bank s Financial Performance 48 ix

11 ABBREVIATIONS CE CBK HR ROA ROE ROI Corporate Entrepreneurship Central Bank of Kenya Human Resource Return on Assets Return on Equity Return on Investment x

12 CHAPTER ONE 1.0 INTRODUCTION 1.1 Background of the Problem The global economy is creating profound and substantial changes for organizations and industries throughout the world. These changes make it necessary for business firms to carefully examine their purpose and to devote a great deal of attention to selecting and following strategies that have a high probability of satisfying multiple stakeholders (Kuratko, 2009). In response to the rapid changes occasioned in the business environment, many firms are currently restructuring their operations and infusing entrepreneurial thinking into large bureaucratic structures (Kuratko, 2009).Traditionally, competitive advantage was achieved by having lower costs than the competition, achieving higher quality or product performance, adding a new product feature, offering more selection or delivering better customer service. (Kuratko, 2011)unfortunately these strategies can no longer produce sustainable advantage thus the new quest for competitive advantage requires that companies and the managers within them continually reinvent themselves. Competitive advantage is therefore attained when companies are more adaptable, flexible, fast, aggressive, and are better positioned not only to adjust to a dynamic, threatening, and complex external environment, but to create change in that environment (Heavey and Walters, 2009).These five organizational capabilities ultimately come down to entrepreneurship. Increased consensus has been attained on the concept of entrepreneurship as the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence(hisrich, 2008). One growing entrepreneurship research sub-field is intrapreneurship, i.e. the practice of entrepreneurship in organizations. Corporate entrepreneurship (intrapreneurship) has been defined in several ways: as a process by which individuals pursue opportunities independent of the resources they control(stevenson, 1990); as doing new things and departing from the customary to pursue opportunities (Vesper, 1990); and as the process whereby an individual or a group of 1

13 individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization(sharma, 1999) Corporate entrepreneurship (CE) is often tested based on the following factors; risk taking, innovativeness, pro-activeness, and competitive energy (Sharma, 1999).Lumpkin (1996) added autonomy as a critical factor. Risk taking refers to a firm s willingness to assume the various risks associated with new venture creation even when the payoff is uncertain. Proactiveness denotes a firm s disposition and actual commitment to beating the competition by being first to the market with new products, systems or processes, whereas innovativeness refers to a firm s investment in and commitment to product, process and organizational innovation (Zahra, 2001). Several studies have made clear that intrapreneurship could actually foster organizational growth. For instance (Zahra, 1995) reported a positive correlation between corporate entrepreneurship and revenue growth. Similarly (Wiklund, 1999)also found a positive association between changes in corporate entrepreneurship and organizational growth. Several explanations have been made for the positive relationship between Intrapreneurship and organizational growth. The first explanation highlighted by Zahra (2005), suggests that intrapreneurship leads to new venture creation by combining resources and uncovering opportunities for growth. The second explanation put forward is that intrapreneurship leads to the creation of new knowledge that is useful in finding new opportunities and creatively exploiting them to achieve growth (Zahra, 2005). This study will zero in on CE dimensions of commercial banks in Kenya and try to determine their effect on financial performance. A number of studies carried out to establish strategies used by commercial banks to remain competitive have quite often focused on effective human resource management, marketing strategies, low cost leadership among other common practices. For instance( Ndung u et al. 2014) in their study the Response Strategies by Commercial Banks to Economic Changes in Kenya, only highlighted human resource realignment, expansion strategies and cost cutting measures. Kathuni and Mugenda (2012), on the other hand recommended direct sales strategy. Chiteli (2013) viewed new product offerings as a sure way of banks remaining competitive. Likewise Coates (2007) in her study of Equity Bank concentrated on leadership as a key aspect in corporate growth. To this extent 2

14 many researchers have not addressed adequately the emergence of corporate entrepreneurship particularly in our local context. 1.2 Statement of the Problem As previously discussed a large part of corporate entrepreneurship research has examined direct impacts of corporate entrepreneurship activities on both growth and profitability (Zahra, 1991, Zahra and Covin, 1995). A study done in Turkey by Aktan and Bulut (2008) in examining the impact of corporate entrepreneurship on financial performance of firms revealed that each dimension of CE (innovativeness, risk taking, pro-activeness and competitive aggressiveness) positively correlated with financial performance. Locally however there is relatively little field research done regarding the success or failures of large businesses which have tried to instill corporate entrepreneurship within their businesses. Many of the studies done locally are centered on individual enterprises and usually take a case study approach. For example Njoroge (2011) in her study of Nation Media Group concentrated on CE dimensions of that company alone and did not look at the wider industry. Likewise Coates (2007) in her study of Equity Bank concentrated only on leadership aspect and did not look at CE dimensions affecting large enterprise performance. From the existing literature there is remarkably little examination of the connection between CE dimensions and financial performance of commercial banks even though there is supporting evidence that CE does exist in some commercial banks. This study will thus seek to contribute in closing the literature gap that exists by seeking data from an array of commercial banks. To advance our course this study, will adopt a firm s financial performance as a dependent variable, which is a broader and more comprehensive indicator of corporate performance (Zahra and Covin, 1995). 1.3 Purpose of the Study The purpose of this study is to determine the impact of corporate entrepreneurship on financial performance of firms, evidence from Kenya s Banking Industry. 3

15 1.4 Research Questions i. What effect does innovation have on perceived financial performance of commercial banks in Kenya? ii. What effect does risk taking have on perceived financial performance of commercial banks in Kenya? iii. Which has a greater impact on the perceived financial performance of commercial banks in Kenya: pro-activeness; competitive aggressiveness or autonomy? 1.5 Significance of the Study The Banking Industry Commercial banks will benefit from this study as there is little formal study conducted in the field of corporate entrepreneurship for this industry. The findings can be used to set standards for benchmarking for financial institutions and also serve as guideline for firms that would be keen in infusing entrepreneurial thinking into their structure Management The findings may also be helpful to managers in defining the role of employees in innovation and new venture creation. In addition, the study will contribute to the understanding of corporate entrepreneurship by managers in structuring of entrepreneurial units. Further it will assist decision makers in undertaking change efforts directed at creating an entrepreneurial climate within the organization Human Resources Department The findings of this study could also be beneficial to HR departments as it will highlight the qualities and characteristics of desirable individuals to recruit, nurture and retain. In addition the findings could shed light towards how organizations can use reward tools to encourage innovation. 4

16 1.5.4 Employees The study could also aid employees in grasping their new role, responsibilities and organizational setting modified to suit corporate entrepreneurship Scholars This study will add on to the available literature on corporate entrepreneurship and the recommendations will provide guidelines to future researchers who might be interested in exploring this concept further. 1.6 Scope of the Study The study will focus on Commercial Banks in Kenya that number 44 at the moment and whose head offices are located in Nairobi. The respondents would be selected across the 44 banks to participate in filling questionnaires to be sent out. The study will be conducted between September and December Limitations Due to time and resource constraints the study only reviewed corporate entrepreneurship dimensions in the banking industry and therefore did not include other financial sector players such as the stock exchange, insurance, micro finance institutions, Savings and Credit Cooperatives (SACCO s) and pension funds. However this provides an opportunity for further research. 1.8 Definition of Terms Entrepreneurship Entrepreneurship has been defined in several ways: as a process of creating something new and assuming the risks and rewards (Hisrich, 2008); a dynamic process of vision, change, and creation that requires an application of energy and passion toward the creation and implementation of new ideas and creative solutions (Kuratko, 2009). 5

17 1.8.2 Corporate Entrepreneurship Corporate entrepreneurship is viewed as the process whereby an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization (Sharma, 1999) Financial Performance Financial performance is viewed as the firm s ability to generate new resources from day to day operations over a specific period of time. (Peterson, 1996) Innovation Innovation is the way of transforming resources of an enterprise through the creativity of individuals to create new resources and wealth (Schumann, 2001) Risk Taking Risk taking involves a willingness to pursue opportunities that have a reasonable likelihood of producing losses or significant performance discrepancies (Kuratko et al, 2011) Pro-activeness Pro-activeness is the ability to act earlier than others in capturing new markets or introducing new products or tapping new resources (Olson et al, 2005) Autonomy Autonomy is defined as the degree to which an individual is given substantial freedom, independence, and discretion in carrying out a task, such as scheduling work and determining procedures to follow (Hackman, 1980) Competitive Aggressiveness Competitive aggressiveness is the intensity of a firm s efforts to outperform industry rivals and taking them head on at every opportunity (Lumpkin and Dess1996). 6

18 1.8.5 Strategy Morris and Paul (2008), define strategy as the direction and scope of an organization over the long-term; which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of the market and stakeholders expectations. 1.9 Chapter Summary This study sought to understand the impact of corporate entrepreneurship on a firm s financial performance and growth. The study sought to fill the gap as there have been very few studies done on the relationship between corporate entrepreneurship and organization performance particularly in the banking industry in Kenya. The study is therefore significant to stake holders in the banking industry as well as scholars who would wish to pursue this study further. The study will thus seek data from forty four banks operating in Kenya within a time frame of four months. Chapter two of this study will present a review of literature on the impact of the five CE dimensions namely Innovation, risk taking, pro-activeness, autonomy and competitive aggressiveness towards an organization s performance. Chapter three will address the methodology that was used in conducting the study such as the population targeted, the data collection tool, the analysis process and means of presenting the data. Chapter four on the other hand will present findings based on the three research questions that this study set out to address. Tables and charts will be used for presentation and a brief description of the results will also be provided in that chapter. Finally chapter five will discuss the findings of the study and present conclusions and recommendations. 7

19 CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 Introduction This chapter will examine the many theoretical and empirical studies done to define the relationship between financial performance of a firm and corporate entrepreneurship dimensions. We commence the study by examining points of interest in corporate entrepreneurship dimensions namely; innovation, risk taking, pro-activeness, autonomy and competitive aggressiveness then link their individual impact on financial performance. The corporate entrepreneurship triggers and inhibitors are also discussed as they can either enable, or discourage, CE in an organization. 2.2 The Effect of Innovation on Financial Performance of a Firm The first dimension that characterizes an entrepreneurial organization is innovativeness. Innovation by definition entails the means by which entrepreneurs exploit change as an opportunity for a different business or a different service (Drucker, 2007). In a nut shell, Innovation has become a fundamental instrument of growth strategies to enter new markets, to increase the existing market share and to provide the company with a competitive edge. Motivated by the increasing competition in global markets, most companies have started to grasp the importance of innovation. Thus, as noted by Kuratko (2005)innovations constitute an indispensable component of the corporate strategies for several reasons such as to apply more productive manufacturing processes, to perform better in the market, to seek positive reputation in customers perception and as a result to gain sustainable competitive advantage. As argued by Hitt (2001), the last two decades has seen innovativeness turn into an attractive area of study for those researchers who tried to define, categorize and investigate its performance impacts, especially due to its practical relevance. Innovations therefore provide firms with a strategic orientation to overcome the problems they encounter while striving to achieve sustainable competitive advantage (Hitt et al., 2001; Kuratko et al., 2005). 8

20 2.2.1 Types of Innovations Product Innovation A product innovation is the introduction of a good or service that is new or significantly improved regarding its characteristics or intended uses; including significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics (OECD Oslo Manual, 2005). As discussed in the OECD Oslo Manual (2005), product innovation can utilize new knowledge or technologies, or can be based on new uses or combinations of existing knowledge or technologies. The term product covers both goods and services. Akova et al (1998), denotes that Product innovation is a difficult process driven by advancing technologies, changing customer needs, shortening product life cycles, and increasing global competition. For product innovation to succeed, it must involve strong interaction between the firm and its customers and suppliers Process Innovation Process innovation focuses on improving processes in an organization to increase efficiency in operations such as manufacturing, human resource or financial management processes. According to the OECD Oslo Manual (2005), process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. Process innovations as stated in the Oslo Manual (2005) can be intended to decrease unit costs of production or delivery, to increase quality, or to produce or deliver new or significantly improved products. As Fagerberg et al (2004) point out, the introduction of new products is commonly assumed to have a clear, positive effect on the growth of income and employment however process innovation has a more hazy effect due to its cost-cutting nature Marketing Innovation This type of innovation focuses on marketing function or marketing mix and results in new ways of promotion, pricing, distribution or development of new markets. In a clearly defined term, marketing innovation is the implementation of a new marketing method involving 9

21 significant changes in product design or packaging, product placement, product promotion or pricing (OECD Oslo Manual, 2005). Marketing innovations target at addressing customer needs better, opening up new markets, or newly positioning a firm s product on the market with the intention of increasing firm s sales. Kotler (1991) acknowledges that, Marketing innovations are strongly related to pricing strategies, product package design properties, and product placement and promotion activities along the lines of four P s of marketing Management Innovation &Organizational Innovation Management innovation aims at improving organization s management systems including implementation of TQM, JIT, or Business Process Reengineering in order to steer the organization towards meeting its objectives. There is a strong link between management innovation and organizational innovation as both of them could lead to new organization systems. Organizational innovation is therefore the implementation of a new organizational method in the firm s business practices, workplace organization or external relations. Organizational innovations have a tendency to increase firm performance by reducing administrative and transaction costs, improving workplace satisfaction (and thus labor productivity), gaining access to non-tradable assets (such as non-codified external knowledge) or reducing costs of supplies (OECD Oslo Manual, 2005). Examples of organization innovations would be: the introduction of training programs for employee development and improved employee retention; or the initiation of a supplier development program. Various researchers have thus concurred that organizational innovations are strongly related with all the administrative efforts of renewing the organizational routines, procedures, mechanisms, systems etc. to promote teamwork, information sharing, coordination, collaboration, learning, and innovativeness Innovation and Financial Performance of Firms One of the primary research areas in the recent innovation literature aims to find out the acknowledged relations between innovation types and firm performance. For instance, McAdam and Keogh (2004) investigated the relationship between firms performance and its familiarity with innovation and research. They found out that the firms inclination to innovations was of vital importance in the competitive environments in order to obtain higher 10

22 competitive advantage. Likewise Geroski (2005) examined the effects of the major innovations and patents to various corporate performance measures such as accounting profitability, stock market rates of return and corporate growth. In their study they observed direct effects of innovations on firm performance to be relatively small, and the benefits as more indirect. However, innovative firms seem to be less susceptible to cyclical sectorial and environmental pressures than non-innovative firms As noted by Drucker (2007), companies today find that they must innovate more than in the past. Much of the pressure to innovate is due to external forces, including the emergence of new and improved technologies, the globalization of markets, the fragmentation of markets and dramatic social change. However, internal pressures exist as well, including pressures to cut costs, developing new capabilities and the ability to attract and retain high-quality employees. This push for more innovation in organizations leads to achievement of a sustainable competitive advantage in terms of: new and improved product offerings and superior organization s capabilities (Morris and Kuratko 2002). Thus most researches concur that innovation is vital in improving a firm s competitive position in the marketplace which ultimately leads to high financial returns as explained below. Marketing competence brought about by a mix of (product, process, marketing organizational) innovation, is seen as one of the most important sources of financial performance (Li, 2000) since, market share and sales growth may directly contribute to the financial goals thanks to the increasing amount of price premiums and sales revenues and decreasing amount of marginal unit costs leading to a significant increase in the overall profitability (Wang and Wei, 2005) 2.3 The Effect of Risk Taking on Financial Performance of a Firm Risk taking involves a willingness to pursue opportunities that have a reasonable likelihood of producing losses or significant performance discrepancies (Kuratko et al, 2011). Another definition put forward is that risk taking is venturing into unknown by engaging in calculated business related eventualities such as firms orientation to go for new initiatives for the purpose of corporate profit and performance. From the latter definition, one can deduce that the emphasis in corporate entrepreneurship is not on extreme, uncontrollable risks, but 11

23 instead on the risks that are moderate and calculated.the risks involved in this case could be financial, technical or market related (Kuratko et al, 2011). These risks are reflected in the various resource allocation decisions made by an individual or organization Types of Risk Financial Risks Financial risk is viwed as the probability of loss inherent in financing methods which may impair the ability to provide adequate return. Financial risk generally arises due to instability and losses in the financial market caused by movements in stock prices, currencies, interest rates and more. Most financial risk can be categorized as either systematic or non-systematic. Systematic risk affects an entire economy and all of the businesses within it whereas nonsystematic risks are those that vary between companies or industries; these risks can be avoided completely through careful planning. There are several types of systematic risk. Interest risk is the risk that is caused by changing interest rates that make current investment's rate look unfavorable. The second kind of systematic risk is, Inflation risk which is associated with a rise in inflation, making investment's return smaller in relation. The third kind of systematic risk is, liquidity risk. This is associated with "tying up" ones money in long-term assets that cannot be sold easily.nonsystematic risks is identified first with management risk which is the risk associated with bad management decisions that hurts a company profitability. Secondly, credit risk is the risk that a debt instrument issuer (such as a bond issuer) will default on their repayments (Brigham & Dives, 2004) Marketing Risks Crane(2005), defines marketing risks as any marketing related activity or event that is uncertain leading to the variability and unpredictability of prices producers both receive for their products, and pay for production inputs. She further states that, Investing time, money and resources in marketing is critical to the success of most companies. However, like other business investments, marketing has risks. These risks exist within each critical element of 12

24 marketing, including customer and product research, design and development, promotion, sales and customer service Technical risks Lumpkin and Dess (1996), viewed technical risks as the exposure to loss arising from activities such as design and engineering, manufacturing, technological processes and test procedures.the probability of loss incurred through the execution of a technical process in which the outcome is uncertain. Untested engineering, technological or manufacturing procedures entail some level technical risk that can result in the loss of time, resources, and possibly harm to individuals and facilities. Technical risk is measured as an expected value derived from prior experience that led to undesirable results Risk Taking and Financial Performance of Firms A recent research indicated that entrepreneurs score higher in risk taking than do nonentrepreneurs (Lumpkin & Dess 1996). Similarly entrepreneurs in an organization share in this trait.foo and Lim (2002), in their work conceptualized risk taking as the organizational orientations to go for new initiatives for the purpose of corporate profit and growth by tolerating the possible calculated loses. As argued by Bluedorn (1999) and Kanter(2006), conservative and risk-averse attitudes of firms do cause loss of competitive position and a decline in market share. Successful firms therefore identify new markets or introduce new services/products to the existing markets or the combinations of two by taking risks to fulfill the market opportunities. Risks however, are better managed by focusing on frequent, lower-risk market incursions with a variety of new product and service options or by pursuing higher-risk with commensurately higher reward potential(kuratko et al, 2011). The benefit therefore of taking calculated risks is that an organization gains an early advantage of new product and service opportunities yet to be identified by competitors. Locking up of a market opportunity enables an organization to realize high sales and profit margins which are key indicators of financial performance of a firm. 13

25 2.4 The Impact of Pro-activeness on Financial Performance of a Firm Pro-activeness is the ability to act earlier than others in capturing new markets or introducing new products or tapping new resources. This forms a vital ingredient of entrepreneurship in which an entrepreneur seeks new opportunities which may not be related to the present line of operations (Olson et al, 2005). According to Rauch and et al 2009, Pro-activeness shows a firm s aggressive pursuit of market opportunities and a strong emphasis on wanting to be among the very first to implement innovation in its industry. Further they assert that, Proactiveness is an opportunity-seeking, forward-looking perspective characterized by the introduction of new products and services ahead of the competitors and acting in anticipation of future demand (Rauch et al 2009). Wiklund (1999) stated that, pro-activeness gives firms the ability to present new products or services to the market ahead of competitors, which also gives them a competitive advantage. As discussed by Lumpkin and Dess (1996) in their study, Pro-active firms have a greater tendency to lead than to follow in the development of new procedures and technologies and the introduction of new products and services. According to Lumpkin and Dess (1996), the importance of being a first-mover or pioneer has been frequently emphasized in the entrepreneurial process. Proactive firms have thus been observed to be first-movers when they face threats and/or opportunities in their environment (Agca et al 2009). At a company level, Miller(1987) associates proactiveness with assertiveness, which he in turn views as a dimension of strategy making. He views entrepreneurial firms as acting on rather than reacting to their environments. His scale to measure proactiveness includes three items: following versus leading competitors in innovation; favoring the tried and true versus emphasizing growth, innovation and development; and trying to cooperate with competitors versus trying to undo them. Kuratko et al, (2011), further argue that proactiveness is concerned with implementation, with taking responsibility and doing whatever is necessary to bring an entrepreneurial concept to fruition. It involves considerable perseverence, adaptability, and a willingness to assume responsibilty for failure. Proactiveness in saturated market requires a firm to be fast and the first by finding out the new demand or introducing 14

26 new commodity frequently assists to take new position on the way of sustainable competitive advantage (Porter 1980). By extension, proactiveness is assumed when different companies have insights into the value of resources that other companies do not have. It is also the recognition of the company s opportunity. In other words, entrepreneurial proactiveness depends on the attractiveness of an opportunity and ability of the firm to grasp once it is perceived (Kerzner,1997). Entrepreneurial pro-activeness as important as it is in measuring organizational performance, it s not sufficient and therefore it should be linked to knowledge of coordinating inputs and converting such inputs into outputs to ensure high performance. This makes the proactive company to focus on the past, the present and the future with equal zeal, using history to explain and fully understand the present and to challenge and create its own future (Osaze,2003). Coordinating knowledge in different forms to change resource allocation is entrepreneurial. Knowledge and action assist entrepreneurial proactiveness to be conciously and systematically detect and help eliminate error when determining the previous value of resource against the current ones. Most companies do not sometime understand how they experience superior foresight but they do know that entrepreneurial proactiveness is simulated by using performance measures and other relevant factors such as how to invest, type of employee to hire, and the like. Thus a company is proactive when it searches for market opportunities and experiments potential responses to changing environmental trends. This view was shared by Casson, (1999) that management assumes realistic position by creating value, opportunity, recognition and discovering tomorrow s business today Proactiveness and Financial Performance of Firms Organizations benefit from the proactive behavior of their members. At the strategic level, it can be seen in the number and frequency of introductions of new products, services, and processes; the amount of resources devoted to innovation; and how often the firm is a first or second mover. A firm's level of proactive behavior is reflected in how bold versus cautious the company is, the extent to which it shapes the competitive landscape or merely reacts to the moves of others, how actively it creates demand and drives markets, and whether it is an 15

27 industry leader or follower.according to Zahra and Garvis (2000), proactive corporate entrepreneurship, such as first entry, can improve a firm s performance. The first entrants tend to exploit opportunities before their rivals and enjoy significant strategic advantage in the markets (Zahra and Garvis, 2000). Consequently, pro-activeness can be conducive to a company s performance improvement. However as argued by Kotter (1996), organizations that are not proactive tend to have some complacencies. Symptoms of complacency include denial of problems, low or mediocre performance standards, and performance measures that focus on narrow, short-term, functional goals. Such complacencies undermine a firms ability to raise adequate revenues The Impact of Competitive Aggressiveness on Financial Performance of a Firm Competitive aggressiveness is the intensity of a firm s efforts to outperform industry rivals and taking them head on at every opportunity. Lumpkin and Dess (1996) further suggest that competitive aggressiveness involves a combative posture that entails a forceful response to competitors actions. Responsiveness entails either preempting the rival s strategy through a competitive move or reacting to the rival s competitive actions. Organizations which decide to gain share from competitive markets quite often adopt competitive aggressive behaviors by employing marketing strategies like competing on price, increasing promotion and/ or competing for distribution channels or imitating the competitors actions and/ or products (Dess, Lumkin and Eisner 2007). By acting aggressive via marketing tools, they force relatively stronger competitors to make entry barriers for the current markets. From the two points of view either new entrants or existing firms- the purposes of these bold and aggressive behaviors are initially to remain in competition and then to make profit by fulfilling the opportunities of markets The factors influencing competitive aggressiveness have received some attention in recent literature. One such factor has been that of mutual forbearance and multimarket contact. It is suggested in the literature that firms competing in several of the same markets as their rivals will compete with less intensity due to the greater possibility of retaliation (Chen, 1996). However, retaliation is also more likely in such situations. Another firm characteristic that has been posited to affect competitive aggressiveness is capital structure. Utilizing a sample from the airline industry, Zhang (2005) sought to identify the relationships between how a 16

28 firm is financed and the competitive actions undertaken. Zhang hypothesized that greater equity and lower earnings pressure would lead to more aggressive competitive behavior Competitive Aggressiveness and Financial Performance Overall enterprises which decide to be market leaders, adopt competitive aggressive behaviors by employing marketing strategies like competing on price, increasing promotion and/ or competing for distribution channels or imitating the competitors actions and/ or products (Dess et al, 2007). It is characterized by a strong offensive posture, which is directed at overcoming competitors by setting ambitious market share goals and taking bold steps to achieve them (Lumpkin and Dess 1996). 2.6 The Impact of Autonomy on Financial Performance of a Firm Autonomy is defined as the degree to which an individual is given substantial freedom, independence, and discretion in carrying out a task, such as scheduling work and determining procedures to follow (Hackman, 1980). On a broader perspective, autonomy is the freedom granted to teams and individuals employees encouraging them to exercise their creativity in bringing fourth an idea and being able to follow it through to completion. According to Hackman and Oldham (1976), autonomy is one of five job characteristics that determine the motivating potential of a job. As one of a set of job characteristics, autonomy leads to the outcomes of increased motivation and work effectiveness Employee autonomy in boosting a firm s performance Giving task autonomy to employees is generally expected to result in higher motivation, satisfaction, and performance (Argote and McGrath, 1993). Researchers have explored how best to design individual jobs as well as teams so as to take advantage of the benefits of increased task autonomy. Job designs that have a high degree of autonomy create a sense of responsibility and greater job satisfaction in the employee(s). Correlation tests and multiple regression analysis in various studies (revealed a positive relationship between self-esteem and life satisfaction, and that higher autonomy was related to increased productivity of a worker. Overall it appears entrepreneurial firms require a high level of autonomy to enable employees make strong and decisive decisions and guide the direction of the venture 17

29 (Mintzberg and Waters 1985). Simmons (2013), further points out that highly autonomous workers were better citizens, had better team relationships, and were better at translating those team relationships into improved performance. 2.7 Financial performance Financial performance is viewed as the firm s ability to generate new resources from day to day operations over a specific period of time. (Peterson, 1996). It is important to point out that for a long time; financial performance has been perceived only through its ability to obtain profits. This has however changed over time; today the concept of performance has different meanings depending on the user perspective of financial information.for instance different stakeholders (Managers, Shareholders, Creditors and Government) have varied interest with the firm s financial performance and therefore financial indicators are used to access the firm s economical results. Kaplan and Norton (2000) opine that the financial performance measures can be divided into two major forms: the classical indicators which are based on financial data and the modern indicators which are based on valuation principles. Classic indicators include the rates of return (ROA, ROE, and ROI), gross profit margin, net profit margin, debt ratio, current ratio, acid test ratio. Whereas the modern indicators (Economic Value Added and Market Value Added approaches) derived from stock market values are based on the concept of creating value (Kaplan and Norton, 2000). Various authors (Rutherford et al 2008) have measured financial Performance in terms of growth. Thus, in their study Sales performance, Return on Assets (ROA), employment growth, Return on Sales, Return on Equity (ROE), Return on Investment (ROI), and Operating profit were used to measure financial performance. In this study the variables observed in accessing financial performance are; income, profits and rates of return. The respondents were asked to consider the performance of these items (income, profits and rates of return) in their organization over the last five years. Ngoze et al, (2014) concur that successful entrepreneurial accomplishments will inevitably affect the firm s financial performance in the long run, but in the short run there might be no association among CE climate factors and firm s financial performance criteria. This they attribute to project investments and a firm s internal resource usages or possible losses. Thus 18

30 they argue that, the first signals of successful entrepreneurial accomplishments may be obtained from marketplaces, sales growth and market share. Then, in the long run, these improvements in the competitive position in the marketplace may create higher financial returns as the outcomes of CE. 2.8 Why Organizations need Corporate Entrepreneurship Several studies have theorized that the practice of entrepreneurial behaviors in a company will be positively associated with organizational profitability and growth (Miller 1983; Zahra and Covin 1995; Lumpkin and Dess 1996; Wiklund, 1999; Venter et al 2008; Ireland et al 2009; Kreiser and Davis 2010). These authors have proven that the high level of entrepreneurial behavior within an organization ultimately leads to high levels of performance and profitability. Studies done by Agca et al (2009) and Wang (2008) have confirmed that CE activities have a positive and significant impact on profitability in terms of innovation and risk taking. They argue that, entrepreneurial behavior is a key ingredient for a company s success. Thus entrepreneurial behaviors in a company tend to be associated with higher growth and this behavior is a result of innovation, risk taking and pro-activeness (Moreno and Casillas 2008). As argued by Covin and Miles (1999) corporate entrepreneurship is the spark and catalyst that is intended to place firms on the path to competitive superiority and to keep them in competitive advantageous positions. Through CE, firms are able to rejuvenate, redefine and reposition themselves (Miller 1983; Covin and Miles 1999; Miles et al 2009). Through CE, firms also maintain and increase their sustainable competitive capabilities, which are fostered by different areas of organizational performance (Agca et al 2009). The level of top management involvement in ensuring information flow and aligning different divisions in strategic directions allows them to foster CE with great understanding. Dess et al (1999) argue that, entrepreneurial firms that are first-movers incur the greatest business and financial risk and spend the most on innovative activities, but are always rewarded in the marketplaces. On the other hand, some firms may enjoy long-term benefits from imitation strategy rather than from a high level of innovativeness (Dess et al 1999). 19

31 Through CE, companies are also able to re-engineer internal processes and procedures to secure efficiencies. In this way, they become more competitive (Venter et al 2008). Companies that take entrepreneurship seriously are seen to perform better and able to sustain their businesses. In the study by Barrett and Weinstein (1998), the Cronbach s Alpha of 0.84 was found when evaluating the level of Corporate Entrepreneurship (CE) and company performance. Based on their findings, there is a strong relationship between CE and company performance. In contrast to that, Lumpkin and Dess (1996) argue that examining Entrepreneurial Orientation does not give a true picture of the relationship between CE and company performance if the external environmental factors are not investigated. According to Lumpkin and Dess (1996) a company could easily adapt to fast-changing business environments if it embraced Corporate Entrepreneurship or entrepreneurial behavior. Wang (2008) also states that An entrepreneurial company is one that engages in product-market innovation, undertakes some risky ventures and is first to come up with proactive innovation, beating the competitors. Such characteristics indicate that an organization has a certain degree of corporate entrepreneurship. Wang (2008) added that these characteristics are associated with improved firm performance in today s business environment, where product and business model life-cycles are shortened. Businesses therefore need to constantly seek out new opportunities that will give them a competitive edge and lead to sustainability. Wiklund (1999) in his study also found out that firms that practice Corporate Entrepreneurship perform better and are better and ready to act in a turbulent environment. Conclusions drawn from Morris and Jones (1999), suggest that companies that emphasize on CE have strong entrepreneurial characteristics, such as leadership, good planning systems, a customer-driven orientation, efficient operation and hands-on management 2.9 Corporate Entrepreneurship Triggers A number of authors have argued that, increased global competition, corporate downsizing, rapid technological progress and many other factors have heightened the need for organizations to become more entrepreneurial in order to survive and prosper (Dess et al 1999; Huse et al 2005; Venter et al 2008). Companies operating in such kind of environment have to be more innovative so that they can absorb these pressures. As argued by Huse et al 20

32 (2005), an environment in which an organization operates can be a source of corporate entrepreneurship. Due to the complex and volatile nature of the environment, organizations today are required to be open to signals regarding current and future conditions of the environment and to apply this knowledge to change their own behavior and position themselves in the market. Previous studies have found that environmental dynamism encourages entrepreneurial behavior and innovation (Huse et al 2005; Miller 1983). Environmental dynamism stimulates firms to take advantage of new opportunities created by change. Thus Morris and Jones concur that; corporate entrepreneurship can be triggered by strong entrepreneurial characteristics, such as leadership, good planning systems, a customerdriven orientation, efficient operation and hands-on management. Wekkee et al (2010), further add coaching and entrepreneurial self-efficacy as some of the triggers of corporate entrepreneurship. They proceed to mention that coaching by managers might be important in improving employees entrepreneurial behavior because, through coaching, managers provide their employees with access to resources and expertise. Stimulating CE is therefore a difficult task and it is not something that can be achieved overnight. Rather, becoming more entrepreneurial should be considered to be a learning process (Wakkee et al 2010). Wakkee et al (2010), suggested that entrepreneurial self-efficacy is an important variable, which explains both the strength of entrepreneurial intentions and the likelihood of translating these intentions into entrepreneurial activities. Both management coaching and entrepreneurial self-efficacy are found to be positively related to entrepreneurial behavior (Wakkee et al 2010). It was concluded that organizational and individual variables are crucial predictors of entrepreneurial behavior. These variables tend to trigger entrepreneurial behavior in an organization. A flat organizational structure has been touted as another trigger of CE. Dess et al (1999), mention that organizations that put emphasis on reducing the internal boundaries play a critical role in successful corporate entrepreneurship. A barrier-free organization has been touted as critical in the building of an entrepreneurial environment. Fewer layers of management, interdisciplinary work groups, empowerment of first line managers, supervisors, open communication vertically and laterally and accountability are typical 21

33 features of an organization that embraces corporate entrepreneurship (Lumpkin and Dess 1996). Organizations with enormous resources are also predisposed to have an edge in innovation and fostering entrepreneurial behavior, because they can afford engineers, staff, modern facilities and the latest technology equipment (Barrett and Weinstein 1998; Morris et al 2008). So access to financial resources offers firms the flexibility to invest in research and development and to become more innovative (Clark 2010). External supports from other institutions help smaller firms with scarce resources to invest in innovation (Clark 2010). So, according to Barrett and Weinstein (1998), larger firms are more entrepreneurial than smaller firms due to access to resources. The availability of such resources tends to trigger corporate entrepreneurship Corporate Entrepreneurship Barriers One major barrier of corporate entrepreneurship is the traditional hierarchy-driven organizational model. Dess et al (1999) argue that such models make it difficult to foster corporate entrepreneurship in an organization. They emphasize that such models tend to create clearly-defined boundaries that limit flexibility and choke communication. Moreover, these organizations often suffer from political issues arising from different levels in the structure. Such politics make it difficult for information to flow freely within an organization. According to Morris et al (2008), bureaucratic structures constrain entrepreneurial behavior in an organization. Dess et al (1999); Morris et al (2008) state that, Hierarchical levels in traditional structures which assign responsibility for entrepreneurial activities to managers, without delegating adequate amounts of authority, also represent constraints on entrepreneurship behavior. Clark (2010) recommends that organizations need to review existing policies and programs to support and facilitate entrepreneurial and innovative growth. Another barrier of CE is an organization that is averse to risk. Such a culture in an organization discourages employees from acting in an entrepreneurial manner (Morris et al 2008). Due to the presence of this type of culture, a firm will tend to possess a lower level of intrapreneurship. A common symptom of a risk averse organization is; budgeting systems 22

34 with no room for failure. This poses a threat on risk taking because there are no funds for experimental projects (Morris et al 2008). Other obstacles such as structure, strategic direction, policies and procedures, people and culture tend to become barriers when attempting to introduce intrapreneurship into a firm. Culture has been noted as a key element in fostering entrepreneurial activities in an organization and companies that practice entrepreneurship are more successful than the ones that don t (Lumpkin and Dess 1996; Morris et al 2008; Venter et al 2008). The lack of involvement by senior managers in driving and articulating the vision, mission and aligning these with strategic direction also put constraints on intrapreneurship in an organization (Morris et al 2008; Venter et al 2008). In addition obstacles such as policies, procedures, personnel restrictions, red-tape, limitations to amount of rewards and limited managerial autonomy were identified as leading obstacles that impede entrepreneurial behavior (Morris and Jones, 1999) Chapter Summary The chapter has detailed the various corporate entrepreneurship dimensions that influence a firm s financial performance in terms of sales and profitability. This was in a bid to bring forth knowledge and information that will help in determining expected observations during the research process. Based on previous studies, the overall evaluation of CE is that enterprises involved in entrepreneurial endeavors have more growth and profit levels than firms that do not attempt to engage in CE activities (Agca et al 2009). Thus it can be said that, The intensity of CE in a firm is positively related to the level of organizational growth and profitability. Wiklund (1999) further adds that, There is a positive relationship between Entrepreneurial Orientation and performance. A number of other studies have found that there is a positive relationship between a firm s Corporate Entrepreneurship activities and their long-term organizational performance (Zahra and Covin 1995; Covin and Miles 1999; Wiklund 1999). Entrepreneurial firms must therefore foster organizational learning in order to maximize the effect of Entrepreneurial Orientation on company performance (Wang 2008). Corporate Entrepreneurship is thus important for organizational survival, growth, profitability and renewal (Covin and Miles 1999; Lumpkin and Dess 1996). The next (Chapter 3) of this study 23

35 will provide an explanation and description of the methods and procedures used in conducting the study. 24

36 CHAPTER THREE 3.0 RESEARCH METHODOLOGY 3.1 Introduction This chapter provides a discussion of the research methodology that was used in this study. It discusses the research design with respect to the choice of the design, population of study, sample and sampling techniques, data collection methods as well as data analysis and data presentation methods. 3.2 Research Design A research design refers to a plan for collecting and utilizing data so that desired information can be obtained with sufficient precision or so that hypothesis or research questions can be tested properly (Kothari, 2004). For this study descriptive research design was used as the study sought to determine the impact of corporate entrepreneurship on a firm s financial performance. Lavrakas (2008) describes a descriptive survey research design as a systematic research method for collecting data from a representative sample of individuals using instruments composed of closed-ended and/or open-ended questions, observations, and interviews. It is one of the most widely used non-experimental research designs across disciplines to collect large amounts of survey data from a representative sample of individuals sampled from the targeted population. In this study, quantitative methodology was used due to its ability to focus on various elements of different research techniques, and to engage quantitative statistics to organize information in meaningful ways (Cooper and Schindler 2006). The study sought to measure parameters of corporate entrepreneurship dimensions namely: innovation; risk taking; proactiveness; competitive aggressiveness and autonomy to determine their impact on a firm s financial performance. The descriptive design enabled the researcher to gain an understanding of how these variables influence the population being studied. 25

37 3.3 Population and Sampling Design Population Cooper and Schindler (2006), define population as the total sum of elements about which we wish to make inferences. The population for this study was made up of 43 licensed Commercial banks and 1 mortgage finance company all operating in Nairobi. Out of the44 institutions, 31 are locally owned and 13 are foreign owned. The locally owned financial institutions comprise 3 banks with significant shareholding by the Government and State Corporations, 27 commercial banks and 1 mortgage finance institution Sampling Design Sampling Frame Lavrakas (2008) defines a sampling frame as a list of the target population from which the sample is selected and that for descriptive survey designs a sampling frame usually consists of a finite population. Gill and Johnson (2002) on the other hand describes a sampling frame as a list of members of the research population from which a random sample may be drawn. Mugenda and Mugenda (2003) and Kothari (2004) define the term sampling frame as a list that contains the names of all the elements in a universe. Cooper and Schindler (2000), postulate that a sampling frame should be a complete and correct list of population members only. The sampling frame for this study was derived from the list of all licensed commercial banks and mortgage finance institutions in operation in Kenya as at December, 2011 as they appear in the Central Bank of Kenya website database. Refer to appendix III for the list of population members Sampling Technique Sampling is considered appropriate in the case where the researcher wants to cover a large population. However, since the population is small, a census is considered appropriate for this study. Denscombe (2003) asserts that census technique is whereby all the elements of the population are studied. 26

38 Sample Size Denscombe (2003) poised that the sample must be carefully selected to be representative of the population and the researcher also needs to ensure that the subdivisions entailed in the analysis are accurately catered for. Since a census is preferred in this study over sampling, then the sample size is equivalent to the population size which is 44 institutions. Refer to Appendix III for names of companies that participated. Category Banks/Mortgage finance Targeted Actual Response Response Rate (%) Respondents % 3.4 Data Collection Methods Primary data collection method was used in this study. A structured questionnaire was administered to commercial banks in Kenya and its formulation was guided by the research questions of the study. The questionnaire was organized into seven sections, with the first section covering basic background information of the respondents. The remaining six sections attempted to measure how CE Dimensions influenced an organizations financial performance. The latter six sections comprised of five point likert-style questions ranging from strongly disagree to strongly agree. 3.5 Research Procedures After developing the questionnaire, five respondents were selected to participate in pretesting of the questionnaire. This was done to test the validity of the tool as well as to minimize the likelihood of respondents misinterpreting the questions asked. After the pretest the researcher re-structured and revised the questions to make the questionnaire more effective. The revised questionnaire was then administered using drop-and-pick method. Personal visits were carried out together with follow up phone calls in a bid to improve the response rate. 27

39 3.6 Data Analysis Methods Questionnaires collected from respondents were first screened and numbered then each variable in the questionnaire was assigned a numerical representation and the responses from each respondent coded using a defined coding scheme. After coding, the data was entered into the SPSS software which was used to quantitatively analyze the data both in terms of descriptive statistics and inferential statistics. Descriptive statistics describe the characteristics of the respondents. Descriptive statistics use frequencies, means, modes, medians, standard deviation and coefficients of variation to summarize the characteristics of large sets of data. The following statistics were used in this study (Frequencies, Mean and Standard Deviation). Inferential statistics are used to draw inferences about a population from a sample. In this study correlation and regression tests were performed. Correlation tests reflected the degree to which variables observed related to each other. Regression models on the other hand helped the researcher to predict the outcome of one variable from another variable. This study used both linear and multiple linear regression analysis to test the statistical significance of the various independent variables (Innovation, risk taking, pro-activeness, competitive aggressiveness and autonomy) and the dependent variable (financial performance). The data was then presented using tables, pie charts and bar graphs for clarity and ease of understanding. 3.7 Chapter Summary This chapter described the methodology that was used in conducting the study. The research design is a descriptive study focusing on 44 commercial banks in Kenya as its population frame. A questionnaire was used as the primary data collection instrument and was administered using a drop-and-pick method. The chapter has indicated that statistics were generated with the aid of Statistics Package for Social Sciences (SPSS) and later on presented in the form of tables and charts. Chapter four shall outline the study results and findings. 28

40 CHAPTER FOUR 4.0 RESULTS AND FINDINGS 4.1 Introduction This chapter presents the analysis of the study findings on the impact of corporate entrepreneurship on financial performance of Kenyan Banks. The chapter will present findings based on the three research questions that this study set out to address. Tables and charts will be used for presentation and a brief description of the results will also be provided in this chapter. 4.2 General Information Response Rate As indicated in the preceding chapter, 44 questionnaires were administered to 44 financial institutions (43 banks and 1 mortgage finance), of which 29 institutions responded thus achieving a response rate of 66%. Table 4.1: Response Rate Category Banks/Mortgage finance Targeted Actual Response Response Rate (%) Respondents % Socio Demographic Data The socio demographic data sought from the respondents included the position held in the organization and number of years worked in that organization. Below is an analysis of each demographic. 29

41 Number of Years Spent in the Organization It can be observed from Table 4.2 that the majority of the participants 35% have worked in their organizations for 3-5 year, 31% have worked for 6-10 years whereas 24% have worked for over 10 years and the minority 10% have been in their organizations for less than 3 years. Based on the number of years worked, the respondents are deemed to have sufficient experience with the organization to provide relevant information for this study. Table 4.2: Number of Years Spent in the Organization Distribution No. of years Frequency Percent Below 3 years years years 9 31 Over 10 years 7 24 Total Position held in the Organization Of the respondents who participated in this study, 77% were managers whereas 23% held non-managerial positions. Based upon this data the researcher is confident that majority of respondents are well able to respond to managerial queries in the questionnaire. Figure 4.1: Position Held Position Held 23% 77% Managerial Non Managerial 30