FIRM CHARACTERISTICS AND PERFORMANCE OF PRIVATE HEALTH INSURANCE SECTOR IN KENYA
DOI:
https://doi.org/10.47941/jbsm.400Keywords:
Age, Size, Dynamic capabilities, Transient advantage, Health insurance, performance.Abstract
Purpose: This study sought to establish the influence of firms' characteristics as determinants of transient advantage on performance. Specifically, the study looked at the influence of firm age and firm size on the performance of insurance firms in Kenya.
Methodology: This study employed descriptive research design targeting all the 19 insurance companies that offer health insurance products as at end of December 2017. Secondary data was collected on the firm characteristics (firm age and firm size) and the performance of health insurance (Gross Weighted Premiums and Underwritten Results). Descriptive and inferential analysis was conducted to show the relationship between the variables. The analyzed data was presented by use of bar charts, graphs and frequency tables. Inferential statistics were done including correlation regression and ANOVA.
Results: The study revealed that firm size had a positive relationship between age and firm performance that was statistically significant. The study also revealed that firm age had a positive relationship between age and firm performance that was statistically significant.
Conclusion: Age of a company is a quality that has been identified in this study as a factor which enables a company to gain capabilities which enable it to exploit transient advantage. It has been observed that the age of a company enables it to gain experience and learning which makes it able to overcome the effects of a rapidly changing business environment. With time these companies also gain a reputation placing them above their competitors. Age, alone, may not guarantee the performance of a company. Other factors have to accompany longevity for the firm to be able to exploit transient advantages and improve its performance. This can be proven by the fact that there are firms that had been in the sector for over three decades yet they control a small portion of the market share. This may be because the benefits of accumulated knowledge can be overcome by the inertia, inflexibility and bureaucracy brought about by routine, rules and organizational structure.
Contributions to theory, practice and policy: The study recommended that firms should form partnerships with other firms to enhance cheaper resource outsourcing and offset the disadvantage which comes with firm age and firm size thus increasing firms' profitability. It was also recommended that strategic partnerships should be adopted to enhance new market penetration and faster growth due to pooling of resources. It is further recommended that the age and size of an organization must be well supported by agility to enable the firm exploit transient advantages and that firms must use the financial muscle and experience gained over the years to take advantage of waves of opportunity.
Downloads
References
AAR, I. (2018, May 31st). https://aar-insurance.ke/ke/index.php/about-us/background.html. Retrieved from https://aar-insurance.ke: https://aar-insurance.ke/ke/index.php/about-us/background.html
Abbasi, A., Q. A. (2015). Firms' size moderating financial performance in growing firms: An empirical EVIDENCE from Pakistan. International Journal of Economics and Financial Issues, 334-339.
Akben-Seluk, E. (2016). Does Firm Age Affect Profitability? Evidence from Turkey, International Journal of Economic Sciences, 4(3).
Atif Abbasi, Q. A. (2015). Firms' size moderating financial performance in growing firms: An empirical EVIDENCE from Pakistan. International Journal of Economics and Financial Issues, 334-339.
Castellani, J., Barba Navaretti, G., & Aquilante, T. (2013). Why are small firms less productives? An analysis using Spanish, French and Italian firm-level data. Mimeo.
Çelik, Ö. H. (2018). The effect of age on firm's performance: evidence from family-owned companies. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi,.
Coad, A., Seggara, A. & Teruel, M. (2013). "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, 24(C), 173-189.
Couto V., Plansky J. & Caglar D. (2016). Fit for Growth: A Guide to Strategic Cost Cutting, Restructuring, and Renewal. Willey, Business and Economics.
Derbali, A. L. J. (2014). Determinants of performance of Tunisia insurance companies: Case of life insurance. Determinants of performance of Tunisia insurance companies: Case of life insurance.
Dogan, M. (2013). Does Firm Size Affect the firm Profitability. Research Journal of Finance and Accounting.
Dogan, M. (2013) Does Firm Size Affect The Firm Profitability? Evidence from Turkey. Research Journal of Finance and Accounting, 4(4), 53 - 60
E, K. (2013). Impact of size and age on firms performance: Evidences from Microfinance Institutions in Tanzania. Research Journal of Finance and Accounting.
Gitau, B. N. (2013). Strategies Adopted by Kenyan Insurance Companies to Alleviate Low Insurance Penetration. Thesis. Nairobi, Nairobi, Kenya: UoN.
Haykir , O. & Celik, M. S. (2018). The effect of Age on Firms Performance: Evidence from Family Owned Companies,Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, Nisan, 11(2).
Ilaboya, O. J. & Ohiokha, I. F. (2016). Firm Age, Size and Profitability Dynamics: A Test of Learning by Doing and Structural Inertia Hypotheses, Business and Management Research, 5(1), 29-39.
IRA (2018) Insurance Industry Annual Report 2017. Accessed 10/02/2019 from
https://www.ira.go.ke/images/docs/.../Insurance-Industry-Annual-Report-2017.pdf
IRA (2017). Q2 Statistics. Retrieved from www.ira.go.ke: https://www.ira.go.ke/
Isik, O. Y. U. (2017). The effect of Firm Size on Profitability: Evidence from turkish manufacturing sector. ResearchGate.
Kazungu, J. S., & Barasa, E. W. (2017). Levels, distribution and correlates of health insurance coverage in Kenya. Tropical Medicine & International Health. 7(2) 32-36.
Kioko, N. P. (2013). The relationship between firm size and financial performance of commercial banks in Kenya. Unpublished Master's thesis, University of Nairobi.
Kituku, A. M., & Amata, E. (2016). Determinants of the Uptake of NHIF Medical Cover by Informal Sector Workers: A Case of Unaitas Sacco Members in Murang'a
Kumar, K. (2012). Strategic orientation, innovation patterns and performance of SMEs and large companies. Journal of Small Business and Enterprise Development, 132-145.
Leite R. & Carvalhal A. (2016). Firm Age, Value, Performance And Corporate Governance In Brazil, Corporate Ownership and Control, 13(4), 7-11.
Mazzarol, T., S. R. (2010). The influence of size, age and growth on management in small firms. International Journal of Technology Management.
Mugenda, O. M., & Mugenda, A. G. (2012). Research Methods Dictionary. Nairobi: Arts Press.
Navaretti, G. B. D. C. (2013). Age and Firm growth. Springer Journal.
Mwangi, M. & Murigu J. W. (2015) The Determinants of Financial Performance in General Insurance Companies in Kenya, European Scientific Journal, 11(1), 288-297.
Oyelade, A. (2019). The impact of firm size on firm's performance in Nigeria: a comparative study of selected firms in the building industry in Nigeria. Asian Development Policy Review, 7(1), 1-11.
Pervan, M., Pervan, I. & Curak, M. (2017) The Influence of Age on Firm Performance: Evidence from the Croatian Food Industry, Journal of Eastern Europe Research in Business and Economics, DOI: 10.5171/2017.618681
Downloads
Published
How to Cite
Issue
Section
License
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
