Effect of Mergers and Acquisitions on the Competitiveness of Insurance Companies in Kenya: The Moderating Effect of Competency Trap
Main Article Content
Keywords
Insurance companies, mergers and acquisitions, competency trap, competitiveness, Kenya
Abstract
Mergers and acquisitions (M&A) have become strategic tools for insurance companies worldwide to strengthen market position, improve operational efficiency, and enhance competitiveness. In Kenya, the insurance industry is evolving rapidly, driven by increased demand for insurance products, regulatory reforms and a competitive market environment. Therefore, M&A offer local insurance companies a pathway to consolidate resources, increase capital base and utilize economies of scale to compete more effectively both domestically and regionally. However, M&A also carry risks that may affect competitiveness negatively, particularly when companies fall into a competency trap. The competency trap, therefore, could act as a moderating variable, weakening the expected positive relationship between M&A and competitiveness by affecting the necessary organizational change and learning required for successful integration and growth. This study objective was to evaluate the moderating role of competency trap on the relationship between mergers and acquisitions on the competitiveness of insurance companies in Kenya. The study was grounded on agency theory, while its research approach was based on an epistemological philosophy. A descriptive research design and census sampling technique were used, targeting 50 insurance firms in Kenya, with five senior managers from each firm, totaling 250 respondents. A pilot study was conducted to determine the validity of the research instrument, which was assessed using factor analysis and Cronbach alpha respectively. Data was collected using structured questionnaire and analysed using descriptive and inferential statistics. The study found that mergers and acquisitions (β = 0.288, p = .002) had a statistically significant and positive effect on the competitiveness of insurance firms in Kenya. The competency trap significantly moderated the effects of mergers and acquisitions (β = –0.286, ΔR² = 0.059, p = .000) on the competitiveness of insurance firms in Kenya. Thus, the study concludes that mergers and partnerships enhance firm competitiveness when firms experience a competency trap. Hence the study recommends that Insurance companies should actively pursue mergers and strategic partnerships, to boost competitiveness.
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Robert Njagi , Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya
Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya
Esther Maina , Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya
Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya
Richard Kiai, Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya
Department of Business and Economics, School of Business, Karatina University, P.O. Box 1957-10101, Karatina, Kenya