Analysis of Diversification Strategies and Organizational Performance of Private Information Technology Companies in Kenya

This study examined the effect of diversification strategies on the performance of private IT companies in Kenya, with government ICT policy included as a moderating variable. The objectives were to evaluate the influence of concentric diversification on company performance of private information technology companies in Kenya, analyze the influence of conglomerate diversification (Mergers, Acquisitions and Joint Ventures) on company performance of private information technology companies in Kenya and to find out the moderating influence of Government IT Sector Policy on the relationship between diversification strategy and company performance of private information technology companies in Kenya. The study was mainly anchored on Resource-Based Theory, Dynamic Capabilities Theory, and Balanced Scorecard Theory. A descriptive research design was employed. The population comprised 433 registered private IT firms, from which a simple random sample of 208 companies was drawn. Out of the targeted 208 respondents, 175 returned completed questionnaires, yielding a response rate of 84%. Data was collected using structured questionnaires and analyzed through descriptive statistics, correlation, and multiple regression analyses using SPSS. The findings indicate that concentric and conglomerate diversification strategies positively and significantly influence company performance. However, the moderating effect of government ICT policy on this relationship was weak and statistically insignificant. The coefficient of determination (R²) was 0.774, showing that 77.4% of the variance in performance could be explained by the diversification strategies applied. The study concludes that internal diversification strategies play a more critical role in driving performance than external policy factors. It recommends that private IT firms strategically invest in diversification and innovation to enhance competitiveness and sustain growth.