Strategic Alignment, Sustainable Competitive Advantage, Strategic Leadership and Firm Performance among Commercial Banks in Kenya
DOI:
https://doi.org/10.53819/81018102t70125Abstract
This study examined the serial mediating effect of sustainable competitive advantage and strategic alignment on the relationship between strategic leadership and firm performance among commercial banks in Kenya. An explanatory cross-sectional survey design was adopted, and primary data were collected through structured questionnaires from 304 managers. Descriptive statistics, Pearson correlation, multiple linear regression and Hayes’ PROCESS Macro Model 6 with 5,000 bootstrap samples were used. All six direct null hypotheses were rejected. Strategic leadership positively affected firm performance (B = .626, β = .322, t = 6.430, p < .001, R² = .298), strategic alignment (B = .387, β = .275, t = 5.484, p < .001, R² = .293), and sustainable competitive advantage (B = .481, β = .249, t = 5.523, p < .001, R² = .431). Strategic alignment positively affected firm performance (B = .800, β = .577, t = 11.999, p < .001, R² = .460) and sustainable competitive advantage (B = .880, β = .638, t = 17.523, p < .001, R² = .690). Sustainable competitive advantage had the strongest direct effect on firm performance (B = .693, β = .690, t = 13.360, p < .001, R² = .499). In the serial mediation model, the direct effect of strategic leadership on firm performance remained significant (B = .2801, p = .0009); the total indirect effect was .3458, Boot 95% CI [.2167, .5081]. The indirect effect through sustainable competitive advantage alone was significant (.2121, Boot 95% CI [.1198, .3471]); the indirect effect through strategic alignment alone was not (.0418, Boot 95% CI [-.0048, .0999]); and the serial indirect effect through sustainable competitive advantage and strategic alignment was significant (.0918, Boot 95% CI [.0394, .1617]). The study concludes that strategic leadership improves bank performance both directly and by building durable competitive capabilities that become more valuable when aligned with organizational structures, systems, technology and processes.
Keywords: strategic leadership, strategic alignment, sustainable competitive advantage, firm performance, commercial banks, Kenya, serial mediation
References
Adner, R., & Helfat, C. E. (2003). Corporate effects and dynamic managerial capabilities. Strategic Management Journal, 24(10), 1011–1025. https://doi.org/10.1002/smj.331
Agarwal, B., & Rastogi, S. (2025). Impact of sustainability on firm performance under the moderation of competition: Considering financial and operational performance metrics. Journal of South Asian Development, 20(3), 332–363. https://doi.org/10.1177/09731741251400966
Al Haraisa, Y. E. (2022). The impact of strategic alignment and strategic awareness on strategic performance: Evidence from Jordan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 12(4). https://doi.org/10.6007/IJARAFMS/v12-i4/15676
Albertini, E. (2013). Does environmental management improve financial performance? A meta-analytical review. Organization & Environment, 26(4), 431–457. https://doi.org/10.1177/1086026613510301
Ambilichu, C. A., Omoteso, K., & Yekini, L. S. (2023). Strategic leadership and firm performance: The mediating role of ambidexterity in professional services small- and medium-sized enterprises. European Management Review, 20(3), 493–511. https://doi.org/10.1111/emre.12548
Baker, J., Jones, D. R., Cao, Q., & Song, J. (2020). Conceptualizing the dynamic strategic alignment competency. Journal of the Association for Information Systems, 21(2), 321–345.
Bamel, U., & Bamel, N. (2021). Organizational resources, KM process capability and strategic flexibility: A dynamic resource-capability perspective. Journal of Knowledge Management, 25(5), 1204–1225.
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Baron, R. M., & Kenny, D. A. (1986). The moderator–mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182. https://doi.org/10.1037/0022-3514.51.6.1173
Bhandari, K. R., Ranta, M., & Salo, J. (2022). The resource-based view, stakeholder capitalism, ESG, and sustainable competitive advantage: The firm’s embeddedness into ecology, society, and governance. Business Strategy and the Environment, 31(4), 1525–1537. https://doi.org/10.1002/bse.2967
Bharadwaj, A., El Sawy, O. A., Pavlou, P. A., & Venkatraman, N. (2013). Digital business strategy: Toward a next generation of insights. MIS Quarterly, 37(2), 471–482. https://doi.org/10.25300/MISQ/2013/37:2.3
Bougie, R., & Sekaran, U. (2020). Research methods for business: A skill-building approach (8th ed.). Wiley.
Burns, T., & Stalker, G. M. (1961). The management of innovation. Tavistock.
Central Bank of Kenya. (2024). Bank supervision annual report 2024. Central Bank of Kenya.
Central Bank of Kenya. (2025). Kenya green finance taxonomy and climate risk disclosure framework. Central Bank of Kenya.
Chan, Y. E., Huff, S. L., Barclay, D. W., & Copeland, D. G. (1997). Business strategic orientation, information systems strategic orientation, and strategic alignment. Information Systems Research, 8(2), 125–150. https://doi.org/10.1287/isre.8.2.125
Creswell, J. W., & Creswell, J. D. (2023). Research design: Qualitative, quantitative, and mixed methods approaches (6th ed.). SAGE.
Crook, T. R., Ketchen, D. J., Jr., Combs, J. G., & Todd, S. Y. (2008). Strategic resources and performance: A meta-analysis. Strategic Management Journal, 29(11), 1141–1154. https://doi.org/10.1002/smj.703
Dairo, M., Naqshbandi, M. M., Kaur, S., & Ishak, N. A. (2021). Benchmarking strategic alignment of business and IT strategies: Opportunities, risks, challenges and solutions. Benchmarking: An International Journal, 28(2), 451–476.
Dess, G. G., & Robinson, R. B., Jr. (1984). Measuring organizational performance in the absence of objective measures: The case of the privately-held firm and conglomerate business unit. Strategic Management Journal, 5(3), 265–273.
Drazin, R., & Van de Ven, A. H. (1985). Alternative forms of fit in contingency theory. Administrative Science Quarterly, 30(4), 514–539. https://doi.org/10.2307/2392695
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 21(10–11), 1105–1121.
Field, A. (2018). Discovering statistics using IBM SPSS Statistics (5th ed.). SAGE.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
George, D., & Mallery, P. (2024). IBM SPSS Statistics 29 step by step: A simple guide and reference (18th ed.). Routledge. https://doi.org/10.4324/9781032622156
Gerow, J. E., Grover, V., Thatcher, J. B., & Roth, P. L. (2014). Looking toward the future of IT-business strategic alignment through the past: A meta-analysis. MIS Quarterly, 38(4), 1059–1085.
Gupta, M. (2026). Unveiling the impact of sustainability reporting on banking performance: Role of country-specific determinants. Journal of Economics and Business, 138, 106246. https://doi.org/10.1016/j.jeconbus.2025.106246
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.). Cengage.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2022). Multivariate data analysis (9th ed.). Cengage.
Hambrick, D. C. (2007). Upper echelons theory: An update. Academy of Management Review, 32(2), 334–343. https://doi.org/10.5465/amr.2007.24345254
Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206. https://doi.org/10.5465/amr.1984.4277628
Hartani, N. H., Ekawati, R., & Pradana, M. (2021). The impact of strategic alignment on the sustainable competitive advantage: Mediating role of IT managerial resource. International Journal of eBusiness and eGovernment Studies, 13(1), 59–79.
Hayes, A. F. (2022). Introduction to mediation, moderation, and conditional process analysis: A regression-based approach (3rd ed.). Guilford Press.
Helfat, C. E., & Peteraf, M. A. (2003). The dynamic resource-based view: Capability lifecycles. Strategic Management Journal, 24(10), 997–1010. https://doi.org/10.1002/smj.332
Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M. A., Singh, H., Teece, D. J., & Winter, S. G. (2007). Dynamic capabilities: Understanding strategic change in organizations. Blackwell.
Henderson, J. C., & Venkatraman, N. (1993). Strategic alignment: Leveraging information technology for transforming organizations. IBM Systems Journal, 32(1), 4–16.
Hermundsdottir, F., & Aspelund, A. (2021). Sustainability innovations and firm competitiveness: A review. Journal of Cleaner Production, 280, 124715. https://doi.org/10.1016/j.jclepro.2020.124715
Hermundsdottir, F., & Aspelund, A. (2022). Competitive sustainable manufacturing: Sustainability strategies, environmental and social innovations, and their effects on firm performance. Journal of Cleaner Production, 370, 133474. https://doi.org/10.1016/j.jclepro.2022.133474
Hunitie, M. (2018). Impact of strategic leadership on strategic competitive advantage through strategic thinking and strategic planning: A bi-mediational research. Business: Theory and Practice, 19, 322–330. https://doi.org/10.3846/btp.2018.32
Igartua, J.-J., & Hayes, A. F. (2021). Mediation, moderation, and conditional process analysis: Concepts, computations, and some common confusions. The Spanish Journal of Psychology, 24, e49. https://doi.org/10.1017/SJP.2021.46
Ireland, R. D., & Hitt, M. A. (2005). Achieving and maintaining strategic competitiveness in the 21st century: The role of strategic leadership. Academy of Management Executive, 19(4), 63–77. https://doi.org/10.5465/ame.2005.19417908
Israel, M., & Hay, I. (2006). Research ethics for social scientists: Between ethical conduct and regulatory compliance. SAGE.
Jebet, K. C., Wanza, L., & Jemaiyo, B. (2025). Effect of green innovation on competitive advantage of tier-three commercial banks in Kenya. East African Journal of Business and Economics, 8(2), 428–437. https://doi.org/10.37284/eajbe.8.2.3647
Kalkbrenner, M. T. (2024). Choosing between Cronbach’s coefficient alpha, McDonald’s coefficient omega, and coefficient H: Confidence intervals and the advantages and drawbacks of interpretive guidelines. Measurement and Evaluation in Counseling and Development. https://doi.org/10.1080/07481756.2023.2283637
Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard—Measures that drive performance. Harvard Business Review, 70(1), 71–79.
Kaplan, R. S., & Norton, D. P. (2006). Alignment: Using the balanced scorecard to create corporate synergies. Harvard Business School Press.
Kartika, L. (2024). The effect of strategic leadership on sustainable competitive advantage. International Research Journal of Business Studies, 16(3), 275–287. https://doi.org/10.21632/irjbs.16.3.275-287
Kasuni, J. S., & Juma, D. (2022). Investigating influence of strategic leadership on financial performance of commercial banks in Kenya. International Academic Journal of Human Resource and Business Administration, 3(10), 313–328.
Kenya Bankers Association. (2024). State of the banking industry report 2024. Kenya Bankers Association.
Khan, M., Serafeim, G., & Yoon, A. (2016). Corporate sustainability: First evidence on materiality. The Accounting Review, 91(6), 1697–1724. https://doi.org/10.2308/accr-51383
Khuong, M. N., Tung, D. T., & Quoc, T. H. (2022). Review of empirical research on leadership and firm performance. SAGE Open, 12(3). https://doi.org/10.1177/21582440221109588
Kline, R. B. (2023). Principles and practice of structural equation modeling (5th ed.). Guilford Press.
Kurzhals, C., Graf-Vlachy, L., & König, A. (2020). Strategic leadership and technological innovation: A comprehensive review and research agenda. Corporate Governance: An International Review, 28(6), 437–464. https://doi.org/10.1111/corg.12351
Lawrence, P. R., & Lorsch, J. W. (1967). Organization and environment: Managing differentiation and integration. Harvard Business School Press.
Li, W., Liu, K., Belitski, M., Ghobadian, A., & O’Regan, N. (2016). e-Leadership through strategic alignment: An empirical study of small- and medium-sized enterprises in the digital age. Journal of Information Technology, 31(2), 185–206. https://doi.org/10.1057/jit.2016.10
Lin, Y., & Wu, L.-Y. (2014). Exploring the role of dynamic capabilities in firm performance under the resource-based view framework. Journal of Business Research, 67(3), 407–413. https://doi.org/10.1016/j.jbusres.2012.12.019
Luftman, J. (2000). Assessing business-IT alignment maturity. Communications of the Association for Information Systems, 4, Article 14. https://doi.org/10.17705/1CAIS.00414
Mahdi, O. R., & Almsafir, M. K. (2014). The role of strategic leadership in building sustainable competitive advantage in the academic environment. Procedia - Social and Behavioral Sciences, 129, 289–296. https://doi.org/10.1016/j.sbspro.2014.03.679
Mahdi, O. R., & Nassar, I. A. (2021). The business model of sustainable competitive advantage through strategic leadership capabilities and knowledge management processes to overcome COVID-19 pandemic. Sustainability, 13(17), 9891. https://doi.org/10.3390/su13179891
Memon, M. A., Ting, H., Cheah, J.-H., Thurasamy, R., Chuah, F., & Cham, T. H. (2020). Sample size for survey research: Review and recommendations. Journal of Applied Structural Equation Modeling, 4(2), i–xx. https://doi.org/10.47263/JASEM.4(2)01
Mui, H. K. Y., Basit, A., & Hassan, Z. (2018). The impact of strategic leadership on organizational performance of small medium enterprises (SME) in Malaysia. Journal of Leadership and Management, 13, 154–166.
Muthaura, M. K. (2021). Strategic alignment and performance of commercial banks in Nyeri County, Kenya [Master’s thesis, Kenyatta University]. Kenyatta University Institutional Repository.
Naburuki, S. J. (2024). Strategic direction and performance of financial technology firms in Nairobi City County, Kenya. European Journal of Management and Marketing Studies.
Newbert, S. L. (2008). Value, rareness, competitive advantage, and performance: A conceptual-level empirical investigation of the resource-based view of the firm. Strategic Management Journal, 29(7), 745–768. https://doi.org/10.1002/smj.686
Njuguna, G. N., & Sije, A. (2025). Strategic leadership direction and strategy implementation among commercial banks in Kenya. European Journal of Business and Management Research, 10(6). https://doi.org/10.24018/ejbmr.2025.10.6.2815
Novitasari, M., & Agustia, D. (2023). Competitive advantage as a mediating effect in the impact of green innovation and firm performance. Business: Theory and Practice, 24(1), 216–226. https://doi.org/10.3846/btp.2023.15865
Nunnally, J. C., & Bernstein, I. H. (1994). Psychometric theory (3rd ed.). McGraw-Hill.
Olaka, H., Lewa, P., & Kiriri, P. (2018). Strategic leadership and strategy implementation among commercial banks in Kenya (Working Paper No. 27). Kenya Bankers Association Centre for Research on Financial Markets and Policy.
Pesce, D., Neirotti, P., & Paolucci, E. (2023). The impact of IT-business strategic alignment on firm performance: A taxonomy of industry contexts. Information & Management, 60(5), 103783. https://doi.org/10.1016/j.im.2023.103783
Peteraf, M. A. (1993). The cornerstones of competitive advantage: A resource-based view. Strategic Management Journal, 14(3), 179–191. https://doi.org/10.1002/smj.4250140303
Peteraf, M. A., & Barney, J. B. (2003). Unraveling the resource-based tangle. Managerial and Decision Economics, 24(4), 309–323. https://doi.org/10.1002/mde.1126
Podsakoff, P. M., MacKenzie, S. B., Lee, J.-Y., & Podsakoff, N. P. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology, 88(5), 879–903. https://doi.org/10.1037/0021-9010.88.5.879
Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press.
Preacher, K. J., & Hayes, A. F. (2008). Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behavior Research Methods, 40(3), 879–891. https://doi.org/10.3758/BRM.40.3.879
Probojakti, W., Utami, H. N., Prasetya, A., & Riza, M. F. (2024). Building sustainable competitive advantage in banking through organizational agility. Sustainability, 16(19), 8327. https://doi.org/10.3390/su16198327
Ray, G., Barney, J. B., & Muhanna, W. A. (2004). Capabilities, business processes, and competitive advantage: Choosing the dependent variable in empirical tests of the resource-based view. Strategic Management Journal, 25(1), 23–37. https://doi.org/10.1002/smj.366
Reich, B. H., & Benbasat, I. (2000). Factors that influence the social dimension of alignment between business and information technology objectives. MIS Quarterly, 24(1), 81–113. https://doi.org/10.2307/3250980
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718–804. https://doi.org/10.1177/0149206308330560
Salmerón-Gómez, R., García-García, C. B., & García-Pérez, J. (2025). A redefined variance inflation factor: Overcoming the limitations of the variance inflation factor. Computational Economics, 65, 337–363. https://doi.org/10.1007/s10614-024-10575-8
Saunders, M. N. K., Lewis, P., & Thornhill, A. (2023). Research methods for business students (9th ed.). Pearson.
Schilke, O., Hu, S., & Helfat, C. E. (2020). Quo vadis, dynamic capabilities? A content-analytic review of the current state of knowledge and recommendations for future research. Academy of Management Annals, 14(1), 390–439. https://doi.org/10.5465/annals.2016.0014
Shrestha, N. (2021). Factor analysis as a tool for survey analysis. American Journal of Applied Mathematics and Statistics, 9(1), 4–11. https://doi.org/10.12691/ajams-9-1-2
Sibghatullah, A., Malik, S. Y., & Jamal, W. (2020). The impact of strategic leadership on competitive advantage: The mediating role of ambidexterity and information system: Evidence from Islamic banks in Jordan. International Journal of Innovation, Creativity and Change, 14(9), 1181–1197.
Singh, S., Sharma, M., & Dhir, S. (2023). Strategic leadership in organizations: A systematic review and future research agenda. Leadership & Organization Development Journal, 44(4), 467–489.
Sirmon, D. G., Hitt, M. A., & Ireland, R. D. (2007). Managing firm resources in dynamic environments to create value: Looking inside the black box. Academy of Management Review, 32(1), 273–292. https://doi.org/10.5465/amr.2007.23466005
Smith, S. D., & Thomas, T. F. (2024). The effects of strategic alignment and strategic clarity on multidimensional task performance. Accounting, Organizations and Society, 112, 101524. https://doi.org/10.1016/j.aos.2023.101524
Taherdoost, H. (2021). Data collection methods and tools for research: A step-by-step guide to choose data collection technique for academic and business research projects. International Journal of Academic Research in Management, 10(1), 10–38.
Takawira, B., & Mutambara, E. (2023). The roles of strategic leadership in ensuring sustainable competitive advantage: Empirical evidence from pharmaceutical distribution in emerging markets. Business Ethics and Leadership, 7(4), 89–107. https://doi.org/10.61093/bel.7(4).89-107.2023
Tallon, P. P., Kraemer, K. L., & Gurbaxani, V. (2000). Executives’ perceptions of the business value of information technology: A process-oriented approach. Journal of Management Information Systems, 16(4), 145–173. https://doi.org/10.1080/07421222.2000.11518269
Teece, D. J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350. https://doi.org/10.1002/smj.640
Teece, D. J. (2023). The evolution of the dynamic capabilities framework. In Artificiality and sustainability in entrepreneurship (pp. 113–129). Springer.
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509–533. https://doi.org/10.1002/(SICI)1097-0266(199708)18:7<509::AID-SMJ882>3.0.CO;2-Z
Tupana, G. M., & Kariuki, P. (2024). Strategic leadership practices and performance of commercial banks in Kenya. International Journal of Social Sciences Management and Entrepreneurship, 8(4).
van de Wetering, R., Mikalef, P., & Pateli, A. (2021). Strategic alignment between IT flexibility and dynamic capabilities: An empirical investigation. Information & Management, 58(6), 103510.
Venkatraman, N. (1989). The concept of fit in strategy research: Toward verbal and statistical correspondence. Academy of Management Review, 14(3), 423–444.
Venkatraman, N., & Camillus, J. C. (1984). Exploring the concept of fit in strategic management. Academy of Management Review, 9(3), 513–525.
Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. Academy of Management Review, 11(4), 801–814.
Wachira, M. W., & Wainaina, L. (2025). Strategic leadership and organizational performance: A case of National Bank of Kenya. International Academic Journal of Human Resource and Business Administration, 5(1), 1–18.
Wambua, B. M., & Karihe, J. N. (2023). Influence of strategic leadership practices on the performance of commercial banks listed in Nairobi Securities Exchange, Kenya. International Journal of Social Sciences Management and Entrepreneurship, 7(2), 993–1006.
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5(2), 171–180. https://doi.org/10.1002/smj.4250050207
Winter, S. G. (2003). Understanding dynamic capabilities. Strategic Management Journal, 24(10), 991–995. https://doi.org/10.1002/smj.318
Wooldridge, J. M. (2020). Introductory econometrics: A modern approach (7th ed.). Cengage.
Wu, S. P.-J., Straub, D. W., & Liang, T.-P. (2015). How information technology governance mechanisms and strategic alignment influence organizational performance: Insights from a matched survey of business and IT managers. MIS Quarterly, 39(2), 497–518.
Yamane, T. (1967). Statistics: An introductory analysis (2nd ed.). Harper & Row.
Çakmak, Z. (2026). Strategic leadership: A systematic literature review and research agenda. Akdeniz İİBF Dergisi, 26(1), 86–102. https://doi.org/10.25294/auiibfd.1719115
Özer, F., & Tınaztepe, C. (2014). Effect of strategic leadership styles on firm performance: A study in a Turkish SME. Procedia - Social and Behavioral Sciences, 150, 778–784.
