Selected Dynamic Capability Drivers, Innovative Behavior and Performance of State Corporations in Kenya

Abstract

State Corporations in Kenya play a critical role in national development, yet they consistently encounter performance challenges. Structural inefficiencies, including bureaucratic rigidity, ineffective leadership, inadequate knowledge management, and slow technological adoption, have undermined their operational effectiveness, diminished service delivery, and increased dependency on government financial support. While previous studies have examined these challenges in isolation or within private sector contexts, there remains a significant gap in understanding how dynamic capabilities collectively influence performance in public sector organizations, particularly with respect to the moderating role of innovative behavior. This study addresses this gap by investigating the combined influenced of structural adaptations, technology adoption, leadership styles, and knowledge management on the performance of Kenyan State Corporations, while assessing how innovative behavior modifies these relationships. The study was anchored on Dynamics Capabilities View of the Firm and supported by Resource Based View of the Firm, Diffusion of Innovations Theory and Theory of the Firm. The study employed the Explanatory research designs. This study targeted the 177 State Corporations in Kenya. A sample of 122 State Corporations obtained from Yamane’s formula was used. The unit of observation was the CEO of each sampled organization or his representative. As a result, the study used a sample of 122 respondents. A questionnaire served as the major source of primary data for this investigation. A pilot study was undertaken on 10% of the sample size, that is, 12 State Corporations whose respondents were not included in the final research. SPSS, version 24, was employed in this study to analyze the data collected. Tables, graphs and figures were used to present the results. The study found that there is a significant and positive effect of structural adaptations (β = 0.712; p = 0.000), technology adoption (β = 0.779; p = 0.000), leadership styles (β = 0.849; p = 0.000), and knowledge management (β = 0.869; p = 0.000) on performance of State Corporations in Kenya. In addition, innovative behavior had a significant moderating effect on the relationship between leadership styles (β = -0.522; p = 0.047), one of the attributes of dynamic capabilities and performance. Consequently, innovative behaviour serves as an antecedent to leadership styles and as a moderator. Overall, this implies that dynamic capabilities influence the performance of State Corporations but this relationship is moderated by innovative behaviour. Based on these findings, the study recommends that State Corporations implement flatter structures, decentralize decision-making, and digitize operations to overcome bureaucratic inertia. Leadership development and knowledge-sharing systems should be institutionalized, while innovation should be embedded into organizational strategy through incentive programs and participatory platforms. These reforms are essential to foster agility, accountability, and improved service delivery in Kenya's public sector.