The Influence of Organizational Culture and Market Orientation on Performance of Microfinance Institutions in Kenya

Firms operating in highly competitive industries strive to bolster their performance by building
sustainable competitive advantage. Organizational culture and market orientation are considered
sources of competitive advantage. Organizational culture creates competitive advantage only when it
is strong, encourages creativity and adaptation to changing conditions in the market. Organizational
culture creates behaviors such as market orientation that ultimately leads to superior performance of
the firm. Competition in the microfinance industry is intense as microfinance institutions compete with
each other, commercial banks, savings and cooperative societies and informal money lenders. In
such competitive markets, understanding the drivers of firm performance is necessary. Therefore, our
study was designed to assess the influence of organizational culture and market orientation on
performance of microfinance institutions in Kenya. The population of the study comprised
microfinance institutions that were members of the Association of Microfinance Institutions (AMFI) in
Kenya. We used descriptive cross-sectional survey design. We collected primary data using
structured questionnaire. Our hypotheses were tested through linear regression analysis. Our results
demonstrate that organizational culture significantly and positively influence performance of
microfinance institutions. The partial mediation effect of market orientation on the relationship
between organizational culture and performance was confirmed. The complimentary effect of
organizational culture on market orientation implies that organizations need to spend more resources
in nurturing market orientation to create sustainable competitive advantage through delivery of
superior customer experience. We conclude that the influence of organizational culture and market
orientation on performance is more plausible for mature industries regarded as diverse in terms of
customer needs.