Democratic Leadership, Dynamic Capabilities, Firm Lifecycle Stages, and Survival of Healthcare Based Smes in Nairobi City County, Kenya

Abstract

Small and Medium Enterprises (SMEs) drive world economies but ironically, due to leadership and management challenges among other factors, many do not survive beyond five years. While scholarship on firm survival has gained traction, the impact of leadership on survival of SMEs in the healthcare sector is less understood. This study was designed to investigate the mediating and moderating effects of dynamic capabilities and lifecycle stages respectively on the survival of healthcare-based SMEs in Nairobi City County, Kenya. This was realized through five specific objectives: to investigate the effects of democratic leader behaviors, democratic workplaces, democratic stewardship respectively on the survival of healthcare-based SMEs, and to test the mediating effect of dynamic capabilities and the moderating effect of firm lifecycle stages respectively on the relationship between democratic leadership and the survival of healthcare-based SMEs. The study was anchored on Democratic Theory and complemented with Situational Leadership, Stewardship, Dynamic Capability theories and Greiner’s Growth and Balanced Scorecard models. Research design relied on a pragmatic philosophy and explanatory sequential mixedmethod approach. Quantitative data was collected from a population of 626 senior leaders drawn from a total of 1438 level 2-5 licensed healthcare facilities. Multistage sampling technique was applied to obtain a representative sample size of respondents. A five-point Likert-Scale structured questionnaire was used for collection of primary quantitative data. A total of 482 questionnaires were returned and properly completed in accordance with the scientific research requirements translating to a 77% response rate. The quantitative data was first subjected to Principal Component Analysis for factor extraction resulting in variable components for descriptive and inferential statistics. Data analysis process for descriptive as well as inferential statistics was supported by SPSS v.26.0 software. The five study hypotheses were tested through multiple linear regression models. The primary data for qualitative phase was collected from 11 out of 12 purposively selected SME founders/owners and analyzed through systematic thematic analysis. The results showed that combining the three dimension of democratic leadership influenced firm survival (adjusted R2 was 6.2%). The direct effect of democratic leader behaviors on firm survival was statistically significant but negative (β =-0.203, t=-2.949, p<0.05). The direct effects of democratic workplaces (β =0.205, t=3.39, p <0.05) and democratic stewardship (β =0.21, t=2.992, p<0.05) on firm survival respectively were shown to be statistically significant and positive. The mediating effect of dynamic capabilities on the relationship between democratic and firm survival was partial while the moderating effect of firm lifecycle stages was statistically significant. Based on the findings, it was concluded that to effectively apply democratic leadership, it should be redesigned so that its influence is through a leadership process that pays attention to development of capabilities that generate HR based competences needed for improved firm survival outcomes. The conclusion has implications on the manner in which the different components of democratic leadership are deployed to result in positive performance outcomes and on the adequacy of Democratic Theory as the underpinning theory of democratic leadership model. The findings contribute to new knowledge at theoretical, conceptual, and contextual levels in understanding the nature and practice of democratic leadership. The study makes recommendations for policy implications for practitioners, academia, policy makers, and researchers. It also provides directions for future research focusing on other contexts, use of other dimensions of democratic leadership, and adoption of more robust research designs and methodologies not applied in this study.