ETHICAL PRACTICES AND SUPPLY CHAIN PERFORMANCE AT KENYA REVENUE AUTHORITY JOSSINETER SYENGO A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOL OF BUSINESS, UNIVERSITY OF NAIROBI 2015 DECLARATION This research project is my original work and has not been submitted for a degree in any other university. Signature: ..................................... Date...................................... JOSSINETER SYENGO D61/64055/2011 This research project has been submitted for examination with my approval as the University supervisor. Signature: ..................................... Date...................................... ONSERIO NYAMWANGE LECTURER DEPARTMENT OF MANAGEMENT SCIENCE SCHOOL OF BUSINESS UNIVERSITY OF NAIROBI ii DEDICATION This work is dedicated to Almighty God, my kids Cythia, Sharlyn, Neville and friends. iii ACKNOWLEDGEMENT I would like to express my deepest appreciation to the following people for their support that made this research paper a success. To my academic Supervisor, Onserio Nyamwange for his great contribution and support offered that enabled this research project to take its present form, without his guidance and persistent help, this research would not have been successfully completed. To my great friend Martin Mwenda for his undivided support. I must admit humbly that the success of this research has been largely due to collaborative efforts and devotion of many people to who I owe a lot of gratitude. I humbly say Thank You. iv ABSTRACT The purpose of this study was to determine ethical practices in supply chain performance at the Kenya Revenue Authority. The study was guided by two objectives; to determine ethical practices in supply chain performance at the Kenya Revenue Authority and to establish the effect of ethical practices on supply chain management performance at the Kenya Revenue authority. The sample size was 51 employees of KRA. The study adopted a case study research design because the unit of analysis was one government agency- the Kenya Revenue Authority. The researcher collected data by use of questionnaires which were first edited for completeness and consistency. The analyzed data was presented through percentages, means, standard deviations and frequencies. Additionally the study used inferential statistics that involved multiple regression analysis to determine the effect of ethical practices on supply chain management performance at Kenya revenue authority. The study established that KRA had adopted and implemented ethical practices within the organization to a great extent and that the ethical practices had affected supply chain performance to a great extent. The study recommends that organizations should adopt and enhance ethical practices in their supply chain management which ensures open and impartial processes. It also recommends that that organizations need to invest in identifying the right way of compensating their employees while remaining ethical in the practice. v TABLE OF CONTENTS DECLARATION ............................................................................................................... ii ABSTRACT ........................................................................................................................ v TABLE OF CONTENTS ................................................................................................. vi LIST OF TABLES .......................................................................................................... viii ......................................................................................................................................... viii LIST OF ABBREVIATIONS AND ACRONYMS ........................................................ ix CHAPTER ONE: INTRODUCTION .............................................................................. 1 1.1.1 Ethics ................................................................................................................... 2 1.1.3 Ethical Practices and Supply Chain Performance .............................................. 4 1.1.4 The Kenya Revenue Authority ............................................................................ 8 CHAPTER TWO: LITERATURE REVIEW ............................................................... 13 2.1 Introduction .............................................................................................................. 13 2.2 Theoretical Review .................................................................................................. 13 2.2.1 Stakeholders Theory .......................................................................................... 13 2.2.2 Agency Theory .................................................................................................. 14 2.2.3 Stewardship Theory ......................................................................................... 15 2.3 Ethical Practices in Procurement ............................................................................. 16 2.4 Ethical Concepts and Principles ............................................................................... 23 2.5 Summary of literature Review ................................................................................. 25 2.6 Conceptual Framework ............................................................................................ 26 3.4.1 Sample Size ....................................................................................................... 28 3.5 Data Collection ........................................................................................................ 28 3.5.1 Validity of Research Instruments ...................................................................... 29 vi 3.5.2 Reliability of Research Instruments .................................................................. 29 3.6 Data Analysis .......................................................................................................... 30 CHAPTER FOUR: DATA ANALYSIS, FINDINGS AND DISCUSSION ................ 32 4.1 Introduction ............................................................................................................. 32 4.2 General information ................................................................................................ 32 4.4 Effect of Ethical Practices on Supply Chain Performance of KRA ......................... 41 CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 47 5.1 Introduction ............................................................................................................. 47 5.2 Summary of the Findings ......................................................................................... 47 5.3 Conclusion ............................................................................................................... 48 5.4 Recommendation ..................................................................................................... 49 5.4.1 Recommendations for Policy and Practice ........................................................ 49 5.4.2 Recommendations for Further Studies .............................................................. 49 5.5 Limitations of the Study .......................................................................................... 50 REFERENCES ................................................................................................................. 51 Appendix I: Questionnaire .............................................................................................. 56 vii LIST OF TABLES viii LIST OF ABBREVIATIONS AND ACRONYMS CSR : Corporate Social Responsibility EACC : Ethics and Anti-Corruption Commission EWASCO: Embu Water and Sewerage Company GSCM : Global Supply chain Management IANGOs : Aid Non‐Government Organisations KRA : Kenya Revenue Authority PPOA : Public Procurement Oversight Authority SC : Supply chain SCM : Supply Chain Management SCMA: Supply Chain Management Association SEM : Supplier Ethics Management SPSS : Statistical Package for Social Statistics UN : United Nation ix CHAPTER ONE: INTRODUCTION 1.1 Background of the Study In a highly competitive business environment, organizations are required to manage their supply chains effectively to ensure efficiency in operations. Companies need to effectively link their operations with their supply chain partners such as suppliers, distributors, wholesalers, retailers and end customers so as to improving the performance of the organization (Rai, Patnayakuni & Seth, 2006). Supply Chain Management (SCM) refers to the integration of key business processes from end use through original suppliers that provide products, services, and information that adds value for customer and other stakeholders (Kroes & Ghosh, 2010). It is a set of three or more entities directly involved in the upstream and downstream flows of products, services, finances, and /or information from a source to a customer. The vision of the supply chain as a holistic construct with close cooperation between the different organizational units has replaced the traditional picture of it as a collection of vertically organized functional units (Stadtler & Kilger, 2005). Professional ethics is about managing relations which is a crucial part in SCM. Successful companies use supply chains not only to reduce cost and complement the product but also to nurture long-term value added relationships. A wide range of stakeholders are interested in the social, ethical