BOARD INDEPENDENCE, SOCIAL CAPITAL AND COMPETITIVE ADVANTAGE OF COMMERCIAL BANKS IN KENYA
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Abstract
Competitive advantage is achieved when an organization's activities lead to superior profitability compared to its rivals. In Kenya, while some commercial banks have managed to gain a competitive edge, others have struggled with financial instability, often attributed to governance issues like insufficient board independence. This study explores whether social capital mediates the relationship between board independence and competitive advantage. Utilizing board independence as the independent variable, competitive advantage as the dependent variable, and social capital as the mediator, the research employed descriptive and correlational designs. The study targeted forty-two commercial banks in Kenya, surveying heads of corporate departments. Data collection was conducted via a census survey using a well-tested questionnaire, with reliability confirmed by a Cronbach alpha coefficient of 0.70. SPSS software facilitated the analysis, combining descriptive and inferential statistics. Results indicated a statistically significant relationship between board independence (β = 0.152, t = 3.287, p = 0.000) and competitive advantage. Additionally, social capital significantly mediated this relationship (indirect effect = 0.316; LLCI = 0.236; ULCI = 0.402). The findings suggest that enhancing board independence and social capital are crucial for Kenyan banks aiming to strengthen their competitive position.
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References
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