The Moderating Role of Firm Flexibility in the Human Capital-Competitive Advantage Relationship: Evidence from Kenyan Manufacturing Firms

Organizations are increasingly restructuring their operations and business strategies to enhance flexibility and gain a competitive advantage. To promote workforce flexibility, companies now prioritize core human capital competencies that align with their overall strategic goals, rather than focusing solely on the specific skills needed for individual positions. As a result, researchers have increasingly emphasized managerial and worker competencies, applying the resource-based view (RBV) theory to show that variations in competitive advantage can be attributed to the differences in human capital resources across firms. Despite the growing emphasis on human capital, research has mainly centred on firm performance, often neglecting the direct examination of human capital capabilities and the intermediate outcomes that are crucial for transforming a company’s best practices into profitability. The relationship between firm flexibility and competitive advantage has been somewhat overlooked in the strategic management literature, particularly concerning human capital. This study aims to fill this gap. The research examined 274 manufacturing firms from various sectors, utilizing a proportional allocation method to ensure that the sample sizes corresponded to the sizes of those sectors. An email containing a link to an online survey was distributed to each selected firm. The study revealed a statistically significant and strong positive correlation between a firm’s human capital and its competitive advantage. Additionally, the findings demonstrated a positive and statistically significant correlation between the predictors, including the interaction term, and competitive advantage. While the regression analysis suggests that firm flexibility significantly moderates the relationship between human capital and competitive advantage, this moderating effect accounts for only a small additional variance in competitive advantage. Therefore, further research may be required to validate this moderating role.