The relationship between procurement legal framework implementation, innovation practices and supply chain performance of public entities in Kenya

Abstract

Sound public procurement is essential for supply chain performance as well as for economic and political developments. Worldwide, there is an increase in growth of public entities from 9% to 23% between 2005-2020 with top 8 countries contributing 20% of global trade, this indicating the increasing importance of entities to the economy. Kenya’s public entities contribute Ksh. 438.24 billion spent in public procurement which is about 9% of gross domestic product. However, it is reported that $ 400 billion is lost in public procurement globally. Parastatal reforms report, 2021 show that public entities performance is declining, 18 entities will have Ksh. 382 billion liquidity gap between 2021-2025. Public Procurement Regulatory Authority report 2019 indicate that majority of public entities in Kenya procure at 60% above market prices with suboptimal procurement laws compliance, resulting to public resources wastage, sunken quality and reduced competitiveness. The Authority’s report of 2020 attributes these largely to poor implementation of procurement legal framework and innovativeness. Empirical evidence reviewed focused on few elements of the legal framework in the old constitution of Kenya. Majority of innovation studies were reviews and did not focus on purchasing systems, e-procurements, ICT trainings & integrations. Some reviewed studies on procurement legal framework-performance relationship revealed weak relationship, indicating that moderation effects may abound. Practically, procurement laws, innovation practices and performance exists together. Literature however show that this relationship with innovation practices as a possible moderator is lacking. The purpose of this study was to investigate relationship between procurement legal framework implementation, innovation practices and supply chain performance. Specifically, the study sought to establish effect of procurement legal framework implementation; innovation practices on performance and investigate the moderating effect of innovations on procurement legal framework implementation and performance. The study was mainly grounded on Public Value Theory and adopted correlational survey design on a population of 187 entities. For piloting, 10% of the population as suggested by Cooper& Schindler (2011) was selected through random stratification. Primary data were collected using a questionnaire. Expert reviews, Barletts Sphericity tests (p<0.05), factor correlations (p<0.7) confirmed validity. Reliability was confirmed by values 0.7<α<0.88 through Cronbach Alpha technique. The data were analyzed by regression models. The findings reveal that implementing procurement laws has significant positive effect (β=0.708, R2=0.502, t=12.35, p<0.05), innovation practices has a significant positive effect (β=0.649, R2=0.422, t=10.67, p<0.05) implying that unit implementation of procurement laws and innovation practices results into 0.708 units and 0.649 units increase in performance respectively. Moderated regressions reveal interactive effect (R2=0.11, β=0.393, t=8.555, p<0.05), evidencing that unit adoption of innovativeness improves effect of implementing procurement laws on performance by 11%. The findings corroborate theoretical evidence that public entities can create value by innovatively leveraging their resources. Study recommends: managers in public entities to derive policies of effectively implementing procurement laws, to continuously adopt innovations and to harness innovative ways of implementing procurement laws. The study is deemed effective in its ability to show that more innovative ways of implementing procurement laws will achieve higher results. In practice, study may be crucial contributing to empirical works in Supply Chain Management and government policy formulation in public procurement.