Moderating Effect of Environmental Contingency Factors on the Relationship Between Path Goal Leadership and Performance of Manufacturing Small and Medium Enterprises in Kenya

This study sought to examine the moderating effect of environmental contingency factors on the relationship between path-goal leadership style and performance in manufacturing SMEs in Nairobi. The target population comprised of managers/owners from 425 SME’s listed members of the Kenya Association of Manufacturers based in Nairobi region. A sample size of 369 managers/owners was derived using stratified random sampling technique. Data was collected using self-administered questionnaires. Binary logistic regression (Cox and Snell R Squared) was used and results indicated that the environmental contingency factors explain 16.5 % of the probability of the relationship between path-goal leadership style and organizational performance. The parameter estimates showed that the coefficient of path-goal leadership styles by environmental contingency factors were; directive leadership (2.935, p =.112), supportive leadership (-.427, p =.717), participative leadership (-.4.645, p = 0.046), achievement oriented leadership style (2.586, p = 0.118). Hence, the study failed to reject the null hypothesis that environmental contingency factors do not significantly moderate the relationship between path goal leadership style and organizational performance in three study variables (directive, supportive and achievement oriented leadership styles). However, the study rejected the null hypothesis that environmental contingency factors do not significantly moderate the relationship between participative leadership style and organizational performance. The study revealed that environmental contingency factors did not significantly moderate the relationship in three path goal leadership styles (directive, supportive and achievement-oriented leadership style) and organizational performance while it significantly moderated the relationship between participative leadership style and organizational performance in manufacturing SMEs in Nairobi. Therefore, the study recommends that owners/ managers of manufacturing SME need to define the tasks and duties to be performed, instruct employees on how to carry out tasks and duties and build a cohesive team to carry out tasks especially when they apply participative leadership style to realize optimal organizational performance.