Interaction Between Information Technology Capability, Environmental Conditions And Competitiveness Of Consultancy Firms In Nairobi County, Kenya

ABSTRACT

The business environment is never static, but constantly changing according to the influence of

global and national competitive forces and other environmental factors. Firms respond to the

conditions surrounding them by adjusting their purpose and shape via deployment of appropriate

strategic capabilities to subdue the environmental challenges and enhance competitiveness.

Increasingly many firms have resorted to heavy investments in IT capabilities, to cope with the

changing business environment. However, only some firms receive pay offs while many others

do not. This study is of the view that the difference in competitiveness of firms with respect to

the heavy IT investments, is in the manner in which the individual firms uniquely deploy IT

capabilities. However, there is scarcity of information on the deployment of IT capabilities as a

source of competitiveness. This study undertook to explore how the deployment of information

technology capability may be used to build competitiveness among consultancy firms in Nairobi

County, Kenya. This study tested six hypotheses covering direct and moderated (by

environmental conditions) relationships between IT capability and competitiveness, IT capability

and firm competence and between firm competence and competitiveness. This study adopted the

positivist philosophical approach. The cross-sectional explanatory research design was used for

the study, while random sampling method was used to select the target sample. From the total

population of 265 consultancy firms in Nairobi, a target sample of 200 consultancy firms was

picked via Microsoft excel generated random numbers. Data collection was done via structured

questionnaires, after which simple and multiple regression analyses were used to analyze the

data. External validity of the questionnaire was complied with by ensuring adequate sample size,

which for this study was 200. The reliability of the research instrument was tested via test-retest

method on the same pilot sample and the instrument refined to achieve a Cronbach alpha

coefficient of 0.855. The study found that IT capability positively influences firm

competitiveness (R2 = 0.519, β = 0.613, p < 0.05). IT capability also positively influences firm

competence (R2 = 0.464, β = 0.481, p < 0.05). Firm competence partially mediates the

relationship between IT capability and firm competitiveness. The moderating influence of the

environmental conditions was found to be contingent upon the behavior of the environmental

conditions. At high levels of the environmental conditions, the moderating influence of the

environmental conditions on the direct and mediated relationships (mediated by firm

competence) between IT capability and firm competitiveness was significant, but at low and

medium levels of environmental conditions, the moderating influence of the environmental

conditions was not significant. The study thus concluded that it is the level of environmental

conditions (low, medium and high) that determines the moderating influence of environmental

conditions on the direct and mediated relationships among the study variables. Finally the study

recommends that the consultancy firms in Nairobi County should pay more attention to the level

of IT capability utilized and use more online interaction with customers and suppliers; enhance

the level of automation of processes and customer information; increase the level of usage of

email in the organization and lastly, regularly scan the prevailing environmental conditions in

Kenya in order to timely upscale the IT capability to match any increase in the environmental

conditions. Subsequently, the consultancy firm will enjoy higher level of firm competitiveness in

terms of better cost efficiency, more differentiated services and better service quality.