Strategic Leadership and Performance of Companies Listed on the Nairobi Securities Exchange: The Moderating Role of the Macro Environment

Top executives bear the fundamental responsibility of strategic leadership, with organizational performance enhancement serving as their primary objective. Diverse perspectives exist on the relationship between strategic leadership and corporate performance. This study aims to advance knowledge based on the premise that strategic leadership affects firm performance through the moderating influence of the macro environment. This study was anchored to the Upper Echelons Theory. The research’s overall objective was to examine the influence of the macro environment and strategy implementation on the relationship between strategic leadership and organizational performance of firms listed on the Nairobi Securities Exchange. A positivist philosophical approach informed the study design by utilizing a cross-sectional survey methodology with structured questionnaires for primary data collection. As of December 2021, all 63 NSE-listed companies constituted the research population, with the data analysis incorporating both descriptive and inferential statistical methods. The study established that strategic leadership positively influences the performance of NSE-listed firms. Similarly, the macro-environment exhibited substantial moderating effects on this association. The study concludes that, in order to achieve and maintain superior organizational performance, NSE-firms must adopt strategic leadership while remaining responsive to the dynamics of the macro environment. This research provides partial validation of previous empirical investigations while advancing the theoretical, practical, and policy knowledge domains. 

Introduction

In the current fast-paced business environment, organizations encounter significant hurdles in sustaining a competitive edge and ensuring long-term performance. According to Mutiso and Kilika (2022), strategic leadership is a crucial factor influencing organizational success. It involves top executives’ capacity to foresee future trends, develop a clear vision, remain adaptable, and inspire others to drive the necessary strategic transformations (Hittet al., 2021). Top executives bear the fundamental responsibility of strategic leadership, with organizational performance enhancement serving as their primary objective (Ibrahim & Daniel, 2019). Nevertheless, investigations of the linkage between strategic leadership and corporate performance have yielded mixed and inconclusive results. While some scholars contend that strategic leadership has minimal impact on company outcomes (Orachaet al. 2021; Jaleha & Machuki 2018), others have found a strong positive relationship (Quigley & Graffin, 2017; Aguet al., 2024). This inconsistency is often linked to the influence of macro-environmental conditions across different organizations, particularly in emerging markets such as Kenya (Muthomi & Kilika, 2021), where turbulence can substantially influence how strategic leadership affects organizational performance (Schaap, 2012; Machuki, 2011). Recent studies have underscored the need for organizations to develop dynamic capabilities to navigate complex and uncertain macro-environments (Teece, 2018; Schoemakeret al., 2018).

Organizational performance, conceptualized and measured in various ways, has increasingly been advocated as a multidimensional measurement approach that incorporates financial and non-financial indicators (Bouwmanet al., 2019). This holistic perspective is particularly relevant for companies listed on stock exchanges where market-based measures complement traditional accounting-based metrics (Gitahi, 2016; Machuki & Aosa, 2011). Despite expanded research, significant gaps persist in the understanding of how strategic leadership interacts with complex business environments. The direct link between strategic leadership and organizational performance has been the subject of conflicting empirical research, suggesting a more nuanced relationship influenced by contextual factor research (Smith & Johnson, 2022; Yoonet al., 2023). One such critical contextual factor is the macro-environment. While some studies have explored the effect of individual macro-environmental factors on firm performance (Garcia-Sanchezet al., 2022), a gap remains in the comprehensive research investigating how the interplay between strategic leadership and the wider macro environment affects organizational performance. However, debates linking strategic leadership and corporate performance are inconclusive. It has also been noted that divergence in perspectives may be attributed to the macro-environmental dynamics among firms.

This study focuses on firms listed on the Nairobi Securities Exchange (NSE), Kenya’s principal stock exchange, which contributes significantly to the country’s economic growth. NSE-listed companies represent diverse industries and face rigorous regulatory obligations, making them a suitable setting for exploring the intricate connections between strategic leadership, macro-environmental factors, and organizational performance (Misatiet al., 2019). Observing that numerous NSE-listed companies demonstrate strong performance, while others perform poorly, with some variability attributed to these key concepts, motivated this study. There is a dearth of empirical research examining these relationships within the specific context of the NSE, which represents a significant portion of East Africa’s economic activity. This study sought to provide a complete and context-related analysis of the factors that moderate the influence of strategic leadership on organizational performance. Incorporating insights from the Upper Echelons Theory.

Objective of the Study

The research’s overall objective was to examine the influence of the macro environment on the relationship between strategic leadership and the organizational performance of firms listed on the Nairobi Securities Exchange.

Materials

Theoretical Framework

The theoretical foundations for this study were provided by the Upper Echelons Theory and the Environmental Dependency Theory, with the Upper Echelons Theory serving as the anchor. Upper Echelons Theory (Hambrick & Mason, 1984) proposes that the characteristics and backgrounds of senior leaders significantly influence organizational outcomes and strategic choices. This theory views the organization as a reflection of its top managers’ beliefs and values, providing crucial insight into how strategic leaders interpret and react to their operational environment. This perspective is vital for understanding the links among leadership, macro-environmental conditions, and strategy execution. Environmental Dependency Theory (Pfeffer & Salancik, 1978) posits that organizations are not self-sufficient entities and depend on external resources for their survival and success. Consequently, organizations must manage relationships with external stakeholders and adapt to environmental changes to secure the necessary resources. This theory underscores that organizational behavior is influenced by external factors and highlights the necessity for leaders to effectively manage dependencies and formulate strategies to acquire and maintain critical resources, thus complementing the Upper Echelons Theory by emphasizing external constraints and opportunities.

The operationalization of strategic leadership variables—such as corporate vision, exploitation and maintenance of core competencies, organizational culture, business ethics, and organizational controls—aligns strongly with Upper Echelons Theory. Corporate vision embodies the values and cognitive frameworks of senior leaders, guiding strategic direction and resource prioritization. Exploitation and maintenance of core competencies reflect leaders’ recognition and leveraging of firm strengths, a direct manifestation of their strategic interpretation and decision-making. Organizational culture and business ethics represent the collective norms and moral frameworks shaped by leadership, influencing organizational behavior and strategic implementation. Organizational controls operationalize the mechanisms leaders use to steer, monitor, and adjust strategy execution, reflecting their preferences for governance and accountability. Collectively, these variables capture how leaders’ personal characteristics, beliefs, and values are translated into concrete strategic actions and organizational processes.

Parallel to this, the operationalization of macro-environmental variables such as dynamism, munificence, and complexity aligns with both Upper Echelons Theory and Environmental Dependency Theory. Dynamism captures the pace and unpredictability of environmental change, requiring leaders to adapt their cognitive frames and strategies accordingly. Munificence reflects resource abundance or scarcity, directly influencing leaders’ strategic optimism or caution in exploiting external opportunities. Complexity denotes the diversity and interconnection of external factors, challenging leaders to process multifaceted information for effective decision-making. From the perspective of Environmental Dependency Theory, these environmental dimensions represent critical external conditions that shape organizational resource dependencies and survival strategies. Leaders must manage these external demands and uncertainties to secure essential resources, positioning strategic leadership as both an internal cognitive process (UET) and an external adaptive function (EDT).

In summary, the operationalization of both strategic leadership variables and macro-environmental factors provides a comprehensive framework that bridges leader cognition and values with environmental contingencies. While Upper Echelons Theory anchors the understanding of how leaders’ characteristics influence strategy and organizational outcomes, Environmental Dependency Theory highlights the external constraints and resource dependencies that leaders must navigate. This integrative approach facilitates a nuanced examination of how strategic leadership operates within complex and dynamic external environments to drive organizational performance.

Literature Review

The existing literature offers various insights into strategic leadership and organizational performance. Jeong and Harrison (2017) conducted a meta-analytical examination of 308 empirical studies on the impact of CEO characteristics on corporate effectiveness, revealing a broadly favorable, albeit constrained, connection between specific executive qualities and organizational results. Olaniranet al. (2021) explored the dynamic between strategic leadership and organizational effectiveness across 200 small and medium enterprises in Nigeria, confirming a robust positive relationship but also revealing significant sectoral disparities, suggesting that industry-specific traits may shape leadership-performance conversion. Liet al. (2022) examine the connection between transformational leadership and corporate effectiveness among publicly traded Chinese enterprises. Their investigation demonstrated organizational ambidexterity as a mediating factor and environmental volatility as a moderating element, offering a more thorough analytical framework. However, the applicability of these findings to the Kenyan environment is fundamentally constrained by China’s unique socioeconomic arrangements and institutional structures.

Mutukuet al. (2019) examine how top management team diversity affects performance in commercial banking institutions. While their results indicated a positive connection, they did not directly examine strategic leadership behaviors or the processes through which strategy execution and external circumstances interact with leadership to influence outcomes. Multiple investigations have established that elements, including political volatility, regulatory fluctuations, technological evolution, and socio-economic transformations, substantially impact how leadership behaviors are converted into performance indicator indicators (Kuratkoet al., 2020; Zhaoet al., 2021). For instance, Kuratkoet al. (2020) found that executives demonstrating capabilities to decode macro-level patterns and modify strategic approaches proved significantly more successful in guiding organizations toward exceptional results.

Therefore, this study sought to examine the effect of the macro-environment on the relationship between strategic leadership and organizational performance of firms listed on the NSE. The study’s conceptual model, illustrated below, outlines the relationships between the variables and addresses the question: Does the macro environment moderate the relationship between strategic leadership and the organizational performance of firms listed on the Nairobi Securities Exchange?

Based on the conceptual model presented in Fig. 1 and the research objective, the following hypothesis were developed and tested:

Fig. 1. Conceptual Model: Independent Variable: Strategic Leadership (conceptualized using corporate vision, exploitation and maintenance of core competencies, organisational culture, business ethics, and organisational controls). Moderating Variable: Macro Environment (operationalized using dynamism, munificence, and complexity). Dependent Variable: Firm Performance (operationalized using profitability, customer satisfaction, learning and growth, and business process).

H₀₁: The macro environment has no significant moderating influence on the relationship between strategic leadership and the organizational performance of firms listed on the Nairobi Securities Exchange.

Methodology

This investigation provided a detailed account of the methodology and approaches employed in this study.

Research Philosophy and Design

The investigation is inclined toward the positivist philosophical paradigm, which is premised on the objective reality assumption, pursuing causality and essential patterns, and developing hypotheses subjected to empirical tests. This approach aligns with the prevailing research stream and theoretical postulations of upper echelons, environmental dependency, expectancy, and institutional theories. This study used a descriptive, cross-sectional design. Cross-sectional studies are suitable for assessing notable relationships among research variables at a specific point in time, allowing researchers to gather data from multiple firms listed on the NSE and empirically evaluate correlations among the constructs. This design facilitated the collection of descriptive data for statistical analysis and hypothesis testing, thus ensuring an objective outcome.

Population of the Study

The population of this investigation was 63 listed firms on NSE at the end of 2021, as estimated by the Capital Markets Authority (CMA). This population is considered homogeneous because of the common regulations of the CMA. The NSE-listed entities were chosen as the context because the study’s variables—strategic leadership, macro-environment, strategy execution, and organizational performance—are prevalent and examinable within them. These entities characterize key sectors of the Kenyan economy, and reliable, objective financial, and economic performance data are available due to alignment with the stock market and other legal stipulations.

Data Collection

Primary data were gathered directly from original sources using a semi-structured questionnaire. The instrument comprises five main sections: company background, strategic leadership, strategy implementation, macro-environment, and organizational performance (including financial and non-financial indicators). Each section included closed-ended questions with various indicators. Participants were selected from senior corporate roles, including Chief Executive Officers and departmental heads (human resources, marketing, operations, and finance), as strategic leadership is a defining attribute of the top management team (TMT). One high-level manager completed the questionnaire per organization, as TMT members were actively involved in managing company resources, overseeing change implementation, charting the entity’s future, and participating in strategy crafting and execution. Research assistants distributed and collected questionnaires at the respondents’ places of employment, ensuring timely data collection. The investigation focused on entities listed at the NSE by December 2021, deemed suitable because of their obligation to publish top leadership and corporate performance data.

Reliability and Validity

A pilot study was conducted on a small scale to assess the questionnaire’s feasibility, validity, and reliability. Five members of the TMT, representing 7.9% of the target population, were engaged in the pilot study and were excluded from the primary investigation to avoid bias.

Reliability was assessed through an internal consistency evaluation using Cronbach’s alpha coefficients. Scores of 0.7 or higher, are generally accepted. The reliability evaluation outcomes for the study’s primary constructs were Strategic Leadership (0.952), Strategy Implementation (0.935), macro-environment (0.970), and performance (0.800). All variables fell within “Good” to “Excellent” categories (0.8 to 0.9 range), indicating high internal consistency and reliability.

Validity was evaluated through content, face, and construct validity. Content validity was ensured through structured consultation with academic supervisors and subject matter experts to ensure the comprehensive coverage of relevant dimensions. Facial validity was addressed through an expert review of clarity and representativeness. Construct validity was assessed through exploratory factor analysis after the pilot study. KMO values above 0.5 and statistically significant Bartlett’s results (p < 0.05) were used to determine suitability for factor analysis. All constructs (Strategic Leadership, Strategy Implementation, Macro Environment, Performance) displayed acceptable KMO scores and significant p-values in the Bartlett’s sphericity test.

Data Analysis Model

This study’s data analysis model is based on multiple regression analysis, incorporating Baron and Kenny’s (1986) four-phase mediation methodology. Table I presents the model estimates.

Table I. Model Estimates

Research objective	Research hypotheses	Analytical model	Interpretation
To establish the effect of macro environment on the relationship between strategic leadership and organisational performance of firms listed at NSE	H01: Macro environment has no significant moderating effect on the relationship between strategic leadership and organisational performance of firms listed at NSE	Regression analysis$\text{Y}=\text{Y}=\mathrm{\alpha }+\mathrm{\beta }1\text{X}1+\mathrm{\beta }2\text{X }2+\mathrm{\beta }3\text{X }1\text{X}2+\mathrm{\epsilon }$whereY – PerformanceΧ1 – Strategic leadershipΧ2 – Macro environment.Α – Y-intercept,Β – Model coefficients, Ε – Error/disturbancePearson’s correlation	Adjusted R2 is an indication of the amount of variation in Performances due to Strategic leadership.p > 0.05 and regressionthe coefficient of shows the amount of variation in Performance that is attributable to macro environment

Data Analysis and Results

Response Rate

The response rate achieved in this study was 87.93%. In survey research, an 87.93% response rate is regarded as exceptionally high, especially given Baruch and Holtom’s (2008) findings that the average response rate for organizational research surveys is approximately 52.7% for individuals and 35.7% for organizations. This strong response rate enhances the credibility and dependability of the study’s findings, ensuring that the conclusions are firmly grounded in robust and representative data.

Regression Analysis and Hypotheses Testing

The objective of this study was to establish the effect of the macro environment on the relationship between strategic leadership and the organizational performance of firms listed on the (NSE). The macro environment is expected to moderate the relationship between strategic leadership and organizational performance. To investigate this relationship, the following hypothesis were formulated and empirically tested:

• H₀₁: The macro environment has no significant moderating influence on the relationship between strategic leadership and the organizational performance of firms listed on the Nairobi Securities Exchange.

To test this hypothesis, we employed the hierarchical regression procedure outlined by Baron and Kenny (1986). In the first step, the independent variable (strategic leadership) is used to predict the dependent variable (organizational performance). In the second step, both the independent and moderating variables (macro-environment) were entered simultaneously to assess their combined effects on the dependent variable. In the third and final step, an interaction term (strategic leadership × macro environment) was added to the model, along with the main effects. A statistically significant interaction effect (p < 0.05) indicates the presence of moderation. The results of the hierarchical regression analysis examining the influence of strategic land macro environment on organizational performance are presented in Table II.

Table II. Moderating Effect of Macro Environment on the Relationship between Strategic Leadership and Organisational Performance

Model summary
Model	R	R square	Adjusted R square		Standard error of the estimate
1	0.759a	0.576	0.560		0.36868
2	0.843a	0.710	0.700		0.30746
3	0.846a	0.720	0.704		0.30527
Model		Sum of squares	df	Mean square	F	Sig.
1	Regression	10.534	1	10.534	77.498	0.000b
	Residual	7.748	50	0.136
	Total	18.281	51
2	Regression	12.988	2	6.494	68.695	0.000b
	Residual	5.294	49	0.095
	Total	18.281	51
3	Regression	13.156	3	4.385	47.057	0.000b
	Residual	5.126	48	0.093
	Total	18.281	51
Coefficients
Model		Unstandardized coefficients		Standardized coefficients
		B	Standard error	Beta	t	Sig.
1	(Constant)	2.855	0.134		21.369	0.000
	Strategic leadership	0.379	0.043	0.759	8.803	0.000
2	(Constant)	2.682	0.116		23.033	0.000
	Strategic leadership	0.196	0.051	0.393	3.863	0.000
	Macro environment	0.235	0.046	0.518	5.095	0.000
3	(Constant)	2.636	0.121		21.829	0.000
	Strategic leadership	0.179	0.052	0.358	3.435	0.001
	Macro environment	0.198	0.054	0.436	3.689	0.001
	Strategic leadership*Macro environment	0.077	0.0057	0.146	2.344	0.018

The findings in Table II indicate that, in Model 1, the unstandardized coefficient for strategic leadership is 0.379 (β = 0.759), with a t-value of 8.803 and a significance level of 0.000, indicating a strong direct effect on organizational performance. In Model 2, the coefficient of strategic leadership declined to 0.196 (β = 0.393, t = 3.863, Sig. = 0.000), whereas the macro environment independently contributed a coefficient of 0.235 (β = 0.518, t = 5.095, Sig. = 0.000), indicating that the external context not only matters on its own, but also moderates the leadership-performance link. In Model 3, the coefficients shift further: strategic leadership reduces slightly to 0.179 (β = 0.358, t = 3.435, Sig. = 0.001), whereas the macro environment maintained a strong influence at 0.198 (β = 0.436, t = 3.689, Sig. = 0.001). Crucially, the interaction term (strategic leadership × macro-environment) registers a coefficient of 0.077 (β = 0.146, t = 2.344, Sig. = 0.018), confirming that the combined effect of leadership and the macro-environment significantly shapes organizational performance. These results provide robust evidence that external factors amplify or temper the impact of strategic leadership, thereby reinforcing the need for adaptive and context-aware leadership strategies. The regression results clearly show that the macro-environment significantly moderates the relationship between strategic leadership and organizational performance. These outcomes lead to the rejection of the null hypothesis (H₀₁), affirming that the macro environment significantly moderates the relationship between strategic leadership and the organizational performance of firms listed on the Nairobi Securities Exchange.

Recalling the model:

$$\begin{array}{r}\text{Y}=\text{Y}=\mathrm{\alpha }+{\mathrm{\beta }}_1{\text{X}}_1+{\mathrm{\beta }}_2{\text{X }}_2+{\mathrm{\beta }}_3{\text{X }}_1{\text{X}}_2+\mathrm{\epsilon }\end{array}$$

$$\begin{array}{r}2.636+0.358{\text{X}}_1+0.436{\text{X }}_2+0.146{\text{X }}_1{\text{X}}_2+\mathrm{\epsilon }\end{array}$$

where

Y – performance

Χ₁ – strategic leadership

Χ₂ – macro environment

Α – y-intercept

Β – model coefficients

Ε – error/disturbance

Discussion of Results

The study’s objective was to examine whether the macro environment moderates the relationship between strategic leadership and organizational performance of firms listed on Nairobi Securities exchange, testing H01 (“The macro environment has no significant moderating influence on the association between strategic leadership and the organisational performance of companies listed on the NSE”). The results indicate that the macro-environment significantly moderates this relationship, leading to the rejection of H01. The interaction term (strategic leadership × macro environment) registered a significant coefficient (0.077, p = 0.018) in Model 3 (R² = 0.727), confirming that the combined effect of leadership and macro environment significantly shapes organizational performance. The decreasing magnitude of the strategic leadership coefficient across the models (from 0.759 to 0.358) suggests that the macro environment partially shapes or dampens this impact. This highlights that external forces (political, economic, social, and technological dynamics) are key to determining how well strategic leadership efforts translate into actual performance gains. Leaders must be flexible, anticipate changes, and align their internal strategies with external conditions. This is particularly critical for NSE firms, given market volatility and regulatory shifts.

Conclusion

From the study, it can be concluded that the macro environment substantially moderates the relationship between strategic leadership and organizational performance. This emphasizes the significance of leaders in maintaining external vigilance and responsiveness to evolving environmental patterns, not exclusively concentrating on internal dynamics. In conclusion, the study affirms that in dynamic markets such as Kenya, strategic leadership effectiveness is not determined in isolation but is amplified or constrained by prevailing macro-environmental conditions. As such, a dual focus on leadership excellence and environmental responsiveness is indispensable for sustained organizational success.

Limitations of the Study

The study aimed to examine the influence of strategic leadership, strategy implementation, and the macro environment on the performance of NSE-listed companies. Despite yielding positive findings, several key limitations affect the study’s conclusions: The use of a cross-sectional research design limits the ability to make causal inferences. While the survey allowed analysis of relationships among multiple variables, it could not establish causality, meaning it cannot conclusively claim that strategic leadership significantly influences performance through strategy implementation.The data collection method, relying on questionnaires, is subject to sampling and respondent bias, which limits how generalizable the findings are to the broader population. Access to top-level management data from NSE-listed companies was limited, restricting the sample size and depth of analysis. This low accessibility constrains the breadth of the study and the strength of its conclusions. Conceptually, the study focused on a limited number of variables—strategic implementation, strategic leadership, macro environment, and organizational performance—while excluding many other factors that could affect these relationships. This limits the validity of the findings in understanding the complex influences on organizational performance. Overall, these methodological and conceptual limitations suggest caution in interpreting the results and underscore the need for more comprehensive and causally robust research in this area.

Suggestions for Future Study

Based on these limitations, future research should incorporate moderating and intervening variables that could affect strategic leadership and organizational performance relationships to bridge methodological limitations and provide more reliable findings based on causality. Methodological limitations should also be addressed by adopting research methods that can test causality, such as a longitudinal research design and meta-analysis, and using historically contextualized analyses. More replicated research is needed to address the identified gaps, particularly in different contexts beyond NSE-listed companies, such as small and medium-sized enterprises.

Acknowledgment

I extend my gratitude to my PhD thesis supervisors, Professor Zachary Bolo Awino, Dr. Mohamed Omar, Professor James Njihia, and Professor Martin Ogutu for their invaluable input, availability, guidance, and support during this study. I owe this academic milestone to them. I also acknowledge the chairmen and discussants during the departmental, open forum, and doctoral presentations for their positive critique and valuable input that enriched the thesis, from which this article has been sourced. May God bless you abundantly.

Conflict of Interest

The authors declare that they do not have any conflict of interest.