Moderating Effect of Firm Size on the Relationship between Functional Integration and Firm Performance

The study aimed to determine the effect of functional integration on the performance of manufacturing firms in a developing country context. The study used descriptive survey approach. A structured and semi structured questionnaire was administered to 176 manufacturing firms in Nairobi and surrounding areas. A response rate of 63% was achieved. While, correlation and multiple regression analysis, was used to explain the direction and nature of relationship between the variables respectively. F-statistic was also used to decide the validity of the model while R-squared was used to help determine the model goodness-of-fit. The findings revealed that performance of manufacturing firms was significantly related to the extent of emphasis on the functional integration dimension of strategic planning in the firms. The study, concluded that functional integration dimension in strategic planning had significant effect on manufacturing firm performance indicators of the firms. The study also concluded that, firm size is not moderator in the relationship between functional integration and firm performance. This implies that , irrespective of firm size, functional integration as a strategic capability is available to both small, medium and large manufacturing firms in Kenya. It also suggests that there may be other moderators not dealt with in the study.