Diversification Strategy and Sustainable Performance of Private Universities in Kenya

Abstract

Globalization, unfavorable economic conditions, fierce industry competition and evolving needs of the modern clientele have revolutionized higher education worldwide. Despite their mandate to teach, undertake research and training most universities in Kenya are confronted by a plethora of challenges such as diminishing government capitation and competition resulting from over establishment of universities competing for the same students for tuition income. Many of these universities offer related courses which do not provide their students with wider options in the choice of their career. As a result, private universities have been obligated to revamp their strategies, including but not limited to diversification. This study aimed to assess the role of diversification strategies on sustainable performance of private universities in Kenya, with core competencies as the moderating variable. The study was anchored on Dynamic Capabilities Theory, Upper Echelons Theory, and Institutional Theory. Specifically, the study sought to determine the influence of horizontal diversification, vertical diversification, conglomerate diversification, and geographical diversification on the sustainable performance of private universities, and to establish the moderating effect of core competencies on the relationship between diversification strategy and sustainable performance. The study adopted a post-positivist research philosophy and an explanatory research design. The target population comprised 1,444 senior and middle-level management staff drawn from chartered private universities in Kenya, from which a sample of 313 respondents was selected using stratified random sampling. Data were collected using a structured questionnaire and analyzed using descriptive and inferential statistics. Pearson correlation analysis, multiple linear regression, and hierarchical moderated regression analysis were employed to test the study hypotheses. The findings established that horizontal, vertical, conglomerate, and geographical diversification strategies each had a positive and statistically significant influence on the sustainable performance of private universities in Kenya. The results further demonstrated that core competencies significantly enhanced the relationship between diversification strategy and sustainable performance, although the moderating effect was stronger for some diversification strategies than for others, indicating partial rather than uniform moderation across all diversification dimensions. The study concludes that diversification strategy is an important strategic mechanism for enhancing the sustainable performance of private universities when supported by strong organizational core competencies. The study therefore, recommended that university management should strengthen diversification initiatives by investing in institutional capabilities, strategic leadership, innovation, and resource development to improve long-term sustainability and competitiveness. The study contributes to strategic management literature by providing empirical evidence on the relationship between diversification strategy, core competencies, and sustainable performance within the context of private universities in Kenya.