African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4188

Article in Press

The Effects of Strategic Orientations on the Performance of Financial Institutions in Ethiopia: Does Organizational Capability Mediate the Relationship?

Mesfin Workineh Melese

  •  Received: 15 October 2022
  •  Accepted: 23 December 2022
The study examined the effect of Market Orientation (MO), Entrepreneurial Orientation (EO), and Entrepreneurial Passion (EP) on the performance of Financial Institutions (FIs) in Ethiopia. It also examined how Management Emphasis (MGEs) influences the adoption of these Strategic Orientations (SOs); and the mediating role of Organizational Capability (OC) on the relationship between SOs and performance. Data were collected from 247 managers of FIs using a structured questionnaire, and Structural Equation Modeling (SEM) with SMART PLS4 algorithm was applied for analysis. The result revealed that a) MO, EO, and EP have positive effect on performance, and the effect of MO is strong and significant; b) MGE has a positive significant effect on the implementation and development of MO and EP, and it has an insignificant effect on EO; c) Organizational Capability (OC) fully mediates the effect of EP on performance. Generally, the findings imply that the traditional production-oriented approach is no longer the source of success for FIs in Ethiopia. Hence, there should be a shift in emphasis from production orientation to creating more value for customers through implementing a sound entrepreneurial strategy and enhancing the required internal capabilities.

Keywords: Market Orientation, Entrepreneurial Orientation, Entrepreneurial Passion, Capabilities, Management, Ethiopia, Banks, Insurance