The Role of Ethical Leadership on the Relationship between Dynamic Capability and Performance of Matatu Saving and Credit Cooperative Societies in Meru County, Kenya

Abstract

The public transport sector in Kenya is dominated by Matatus. Matatus plays a crucial economic role in facilitating the movement of people and goods. However, despite the positive contribution to the economy, the Matatu industry is facing challenges of poor performance and lack of discipline. The research gap that the study sought to address is the lack of studies investigating the role of ethical leadership on the relationship between dynamic capability and the performance of Matatu Saccos. Therefore, the study aimed at determining how ethical leadership affects the relationship between dynamic capability and performance of Matatu Saccos in Meru County. The research investigated three factors namely the effects of dynamic capabilities on performance, effects of ethical leadership on performance, and the moderating effects of ethical leadership on the relationship between dynamic capability and performance. Three types of dynamic capabilities namely adaptive capability, absorptive capability, and innovative capability were investigated. The research was guided by the theory of dynamic capabilities and the ethical leadership model. A descriptive cross-sectional survey research design was utilized. The target population was 8 Matatus Saccos operating in Meru County that had complied with Saccos regulations. The census approach was utilized because of the small sample size. All the 54 board members of the 8 Saccos were selected. Closed-ended questionnaires were used to collect data A total of 54 questionnaires were distributed to the respondents using pick and drop method. 42 questionnaires were filled, giving a response rate of 78 percent. A pilot study was conducted using 5 board members to determine the feasibility of the study. The reliability of the instruments was determined by Cronbach's alpha while content validity was determined through expert reviews on the quality of questions in the questionnaires. Data analysis was done using SPSS software; which analyzed the data using means, percentages, and frequencies, and inferential statistics. The presentation of the data was done using frequency distribution tables. Data was tested to ensure conformity with regression assumptions. The regression results of dynamic capabilities established that adaptive capability (p>0.05) and innovative capability (p>0.05) had no effect on the performance of Matatu Saccos. Absorptive capability had a statistically significant relationship with the performance (p<0.05). The study also established that ethical leadership had a significant statistically significant relationship with performance (p<0.05). The regression analysis of the third objective established that ethical leadership had a significant moderating effect on the relationship between dynamic capability and performance (p<0.05). The findings that adaptive capability and innovative capability have no relationship with performance disagrees with most of the previous studies. The research recommends that management should commit time and resources in pursuit of dynamic capabilities to prevent disruption of activities. Future studies should include more variables and be conducted in different geographical regions