Intervening Effect of Back up Generation on the Relationship between Electric Power Outage Dynamics and Financial Performance of Manufacturing Firms in Kenya

Abstract

Most past literature on the correlational link between electric power outage dynamics and performance of manufacturing firms in both developed and developing economies has portrayed dissimilar conceptual debate amongst scholars with little focus on the intervening role played by investment in back up generation. This study aimed at assessing the effect of investment in back up generation on the relationship between electric power outage dynamics and performance of manufacturing firms in Kenya. Positivism philosophical point of view and descriptive survey research design was utilized. It was hypothesized that the relationship between electric power outage dynamics and performance of manufacturing firms in Kenya is not significantly mediated by investment in back up generation, which was tested at 95% confidence level. A population of 447 firms whose main area of focus is manufacturing in Kenya and were also members of Kenya Manufacturers Association was selected out of which a sample size of 138 firms was drawn using Kate (2006) formula and stratified random sampling methodology. Structured questionnaires were utilized to collect data which involved drop and pick approach. The research results indicate that investment in backup generation intervened the correlation between electric power outage dynamics and financial performance. This study outcome augments existing knowledge on the association amongst electric power outage dynamics; investment in back up generation, and financial performance, for it is evident that top management must be judicious in the decision on investment in back up generation in mitigating negative effects of power outage on financial performance of firms. The decisions are on whether investment in backup to address power outage challenges has positive or negative effects on firm performance, while at the same time considering the critical decision on the most optimal level of backup capacity to invest in. The study has also made an input to the academic literature arising from assimilation of two theories, namely; financial theory of investment, and transformation theory. The Kenya Association of Manufacturers (KAM) may use these research findings to guide their member firms on strategies to adopt to ensure continuous productivity and avoidance of damages due to electric power outage dynamics.