The Mediating Role of Value Chain Governance in the Relationship between Dynamic Capabilities and Firm Performance : Evidence from Kenya's Export Horticulture Industry

Abstract

Dynamic capabilities generate performance potential by enabling firms to sense environmental changes, seize opportunities, and reconfigure resources. However, their impact on performance depends on the translation of adaptive responses into coordinated organisational practices. This study investigated the mediating role of value chain governance in the relationship between dynamic capabilities and firm performance among Kenyan export horticulture enterprises. The research is primarily grounded in Dynamic Capabilities Theory, with additional insights from Transaction Cost Economics and the Relational View. Employing a positivist, cross-sectional explanatory design, data from 182 export horticulture enterprises were analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) in SmartPLS 4. The findings demonstrate that dynamic capabilities are positively associated with both value chain governance and firm performance, and that value chain governance is positively associated with firm performance. Furthermore, the results reveal an indirect-only mediation pattern, indicating that value chain governance serves as the principal pathway through which dynamic capabilities influence firm performance. This study advances Dynamic Capabilities Theory by identifying value chain governance as a firm-level governance architecture that institutionalises dynamic capabilities in contractual, certification and standards, environmental, social and governance (ESG), buyer-relationship, and regulatory-compliance practices. The findings highlight the strategic importance of integrating value chain governance with dynamic capabilities in highly regulated African export markets.