THE STRATEGIC EFFECT OF AUTOMATING FINANCIAL SYSTEMS IN DEVOLVED GOVERNMENTS PERFOMANCE A CASE OF NAIROBI COUNTY LYDIA NJERI MAINA A RESEARCH PROJECT PRESENTED INPARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION, SCHOOLOF BUSINESS, UNIVERSITY OF NAIROBI NOVEMBER, 2015 DECLARATION This research project is my original work and has not been presented for academic purposes in the University of Nairobi or any other university. Signed…………………………… Date…………………………… LYDIA NJERI MAINA D61/84311/2012 This research project will be submitted with my approval as the university supervisor. Signed…………………………… Date…………………………… PROF. BITANGE NDEMO SCHOOL OF BUSINESS UNIVERSITY OF NAIROBI ii DEDICATION I dedicate this research project to All Mighty God, my dear husband Mr. John Maina, my children Kelvin and Maree for their love, moral and support you extended to me during my study: As well as their encouragement throughout my research. I love you all. iii ACKNOWLEDGEMENTS From the initial stages to the final draft of this project and in partial fulfilment of the Master of Business Administration degree, I owe an immense debt of gratitude to my supervisor, Prof. Bitange Ndemo for his invaluable support towards the completion of this project. His constructive criticism, careful guidance and patience have been very instrumental to the completion of this project in time. I would also like to thank the Nairobi County Government for availing the data I so much needed to complete this project within the time allocated to me. Special thanks go to the proposal presentation panel and colleagues who were present during the presentation of this project proposal. Finally, and most importantly, I sincerely thank our Almighty God for giving me the strength and providing means to undertake this study. To each of the above, I extend my deepest appreciation. iv TABLE OF CONTENTS DECLARATION........................................................................................................ ii DEDICATION........................................................................................................... iii ACKNOWLEDGEMENTS ...................................................................................... iv LIST OF FIGURES ................................................................................................. vii LIST OF ABBREVIATIONS ................................................................................ viii ABSTRACT ................................................................................................................ ix CHAPTER ONE: INTRODUCTION ....................................................................... 1 1.1 Background to the Study ..................................................................................................... 1 1.1.1 Automated Financial System and Management ..................................................... 2 1.1.2 Automated Financial System and Performance ..................................................... 4 1.1.3 Concept of Strategy ................................................................................................ 4 1.1.4 Devolved Government ........................................................................................... 6 1.1.5 Nairobi County ....................................................................................................... 7 1.2 Research Problem ............................................................................................................... 8 1.3 Research Objective ............................................................................................................. 9 1.4 Value of the Study ............................................................................................................. 10 CHAPTER TWO: LITERATURE REVIEW ........................................................ 11 2.1 Introduction ....................................................................................................................... 11 2.2 Theoretical Review ........................................................................................................... 11 2.2.1 Resource Based View Theory .............................................................................. 11 2.2.2 Agency Theory ..................................................................................................... 12 2.3 Benefits of Automated Financial Systems ........................................................................ 13 2.4 Strategic Effect and Automated Financial Systems .......................................................... 15 2.5 Automated Financial System and Performance ................................................................ 17 2.6 Challenges in the implementation of Automated Financial System ................................. 18 2.7 Empirical Literature .......................................................................................................... 20 2.7.1 Automated Financial System and Performance ................................................... 20 2.8 Conceptual Framework ..................................................................................................... 21 2.9 Summary of Literature Review ......................................................................................... 22 CHAPTER THREE: RESEARCH METHODOLOGY ....................................... 23 3.1 Introduction ....................................................................................................................... 23 3.2 Research Design................................................................................................................ 23 v 3.3 Data Collection ................................................................................................................. 23 3.4 Data Analysis .................................................................................................................... 24 3.5 Summary ........................................................................................................................... 24 CHAPTER FOUR: DATA ANALYSIS RESULTS AND DISCUSIONS ........... 25 4.1 Introduction ....................................................................................................................... 25 4.2 General Information of the Interviewees .......................................................................... 25 4.3 Respondent Analysis ......................................................................................................... 25 4.3.1 Current Financial System ..................................................................................... 25 4.3.2 County Government and Implementation of AFS ............................................... 26 4.3.3 AFS and County Financial Competitiveness ........................................................ 26 4.3.4 Nairobi County Management Goodwill on AFS .................................................. 27 4.3.5 Strategies to enhance Financial Competitiveness ................................................ 27 4.3.6 Level of Employees Involvement in the Implementation of AFS ........................ 27 4.3.7 Effect of AFS in Financial Performance .............................................................. 28 4.3.8 Resource Allocation and the Implementation of AFS .......................................... 28 4.3.9 Nairobi County Government and Future of AFS ................................................. 28 4.4 Discussion of the Findings ................................................................................................ 29 4.4.1 Link to Theory ...................................................................................................... 29 4.4.2 Link to Other Studies ........................................................................................... 29 4.5 Summary ........................................................................................................................... 29 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS . ..................................................................................................................................... 31 5.1 Introduction ....................................................................................................................... 31 5.2 Summary of Findings ........................................................................................................ 31 5.3 Conclusions of the Study .................................................................................................. 33 5.4 Recommendation of the Study .......................................................................................... 33 5.5 Limitations of the Study .................................................................................................... 35 5.6 Suggestions for further study ............................................................................................ 35 REFERENCES .......................................................................................................... 36 APPENDICES ........................................................................................................... 39 Appendix I: Interview Guide .......................................................................... 39 Appendix II: List of Counties ......................................................................... 41 vi LIST OF FIGURES Figure 1.1: Conceptual Framework .......................................................................