Paralyzed by the dashboard light: Environmental characteristics and firm’s scanning capabilities in East Africa

Abstract

Firms in East Africa face highly uncertain environments, fueling environmental dynamism, changes in industry structures, and enhanced competitive dynamics. In order to understand the opportunities and challenges within such an environment, extant theory argues that firms need to develop scanning capabilities. However, since the effect of environmental characteristics on the development of firm capabilities in lower income countries is unclear, we analyze how different environmental characteristics drive or hamper such capabilities. We focus specifically on scanning capabilities that allow firms to respond swiftly to changing needs by monitoring their environment. We include four environmental characteristics: environmental dynamism, heterogeneity, formal and informal competition. We investigate this in Kenya, Tanzania, and Uganda, from which we mustered a sample of 440 manufacturing firms. Our main results indicate that environmental dynamism and informal competition have a paralyzing effect on the development of firms' scanning capabilities in East Africa, which implies that environmental characteristics may hamper rather than help the development of firm capabilities.

External information seeking and organizational ambidexterity in SMEs: Does empowerment climate matter?

“…The fact remains that top executives may lack the time to focus on the wide range of environmental stimuli and struggle to fully grasp their changing environment due to cognitive constraints (Daft et al, 1988; van Uden et al, 2019). External managerial networking, through personal or social contacts outside the firm, is then presented as a relevant alternative when firms have a limited ability to formally scan their environment (McGee & Sawyerr, 2003).…”

Moderating effect of environmental dynamism on leadership practices and employees’ response to change in South Africa

“…Environmental dynamism refers to the rate of change and degree of instability in the environment (Hou et al, 2019). While organisations in developed countries do experience some environmental dynamism, the scale and scope of such dynamism pale in comparison with those experienced in developing countries (Van Uden et al, 2019). Further research is, therefore, warranted on environmental dynamism in emerging markets.…”

“…The reason is that the external changes require internal adjustments, as the contingency theory holds (Turulja and Bajgoric, 2019). The internal planned change processes are, therefore, disrupted, which results in uncertainty due to the instability in the environment (Van Uden et al, 2019).…”