EFFECT OF LEGAL RISKS ON PERFORMANCE OF MANUFACTURING FIRMS IN KENYA
Abstract
The past decades have witnessed growth and expansion in supply chains, with the aim to increase productivity, lower costs and fulfill demands in emerging markets. The increasing complexity in a supply chain hinders visibility and consequently reduces one’s control over the process. To achieve this, there is a need to identify potential risks and evaluate their impacts, and at the same time design risk mitigation policies to locate and relocate resources to deal with risk events. The study specifically determined the effect of legal risks and performance of manufacturing firms, and to determine the moderating role of supply chain adaptability on the relationship between legal risks and performance of manufacturing firms among the manufacturing firms in Kenya. The research design was explanatory survey research design. The target population of this study were 682 manufacturing firms in Kenya. From the target population of 682 firms, a random sample of 169 firms were selected where procurement manager and assistance manager were chosen giving a total sample size of 338. This study used questionnaires to collect data relevant to the study. The variables were tested for reliability by computing the Cronbach alpha statistical tests. Quantitative data collected were analyzed using descriptive statistical techniques which were frequencies, mean, standard deviation. Whereas inferential statistics to be used were, ANOVA/T test, Pearson correlation and the Regression Analysis Model. To test moderating effect the study used hierarchical regression model at 0.05 level of significance. The study established that legal risk have a positive influence on the performance of manufacturing firms. In addition, supply chain adaptability significantly moderated the relationship between legal risks and firm performance. Therefore, it is utmost necessary for manufacturing firms to comply with the country’s law and regulations on supply chain operation. Finally, it is important for firms to enforce environmental incident notices at manufacturing sites and undertake environmental and financial due diligence when purchasing or selling goods/services.
Key Words: Legal Risks, Supply Chain Adaptability, Performance, Manufacturing Firms
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