Does External Environment Influence Organizational Performance? The Case of Kenyan State Corporations

Abstract

External environment’s direct influence on organizational performance has not attracted as much scholarly attentionas the strategic management practice. The main objective of the study was to establish the influence of externalenvironment on performance of Kenyan State corporations. The three dimensions of external environment namelymunificence, complexity and dynamism were used to measure the variable while performance was measured alongall the indicators of the sustainable balanced score card. The study’s population consisted of 108 Kenyan statecorporations and data was collected from 98 organizations. The results revealed that all the hypotheses weresupported. It was established that external environment had a positive significant influence on all the indicators ofperformance. It was evident from the findings that the effect of external environment on organizational performance,while conventionally thought to be negative, the research showed otherwise. It is most likely that Kenya statecorporations have ensured a proper environmental scanning that has led to an accurate stakeholders mapping. Thestakeholders mapping has most likely led to favorability of relationships hence the positive effect of externalenvironment. External environment ought not to impact organizational performance negatively. Results also revealthat indeed the external environment has a direct relationship and influence on organizational performance. Industrialorganization economics theory suggested the structure-conduct-performance paradigm which was later matched withstrategic management’s the environment-strategy-performance. The results of this study seem to allude to anenvironment-performance paradigm. More scholarly poking is therefore necessary to determine the extent to whichthe direct relationship exists.