Organizational learning's effect on firm performance: Evidence from Ethiopian state-owned enterprises

Abstract

This study examines the effect of organizational learning (OL) on firm performance (Prf) in Ethiopian state-owned enterprises (SOEs), addressing a gap in the literature on developing economies. Drawing on Dynamic Capabilities (DCs) theory, the research utilizes an explanatory design and quantitative surveys administered to 365 employees across five strategically significant Ethiopian SOEs. Data was analyzed using covariance-based structural equation modeling (CB-SEM) to examine the causal relationships between OL (dimensions of OL include managerial commitment, systems perspective, openness to experimentation, and knowledge transfer and integration) and Prf (including both financial and non-financial aspects). The study found a significant positive direct effect of OL on Prf (β = 0.61, p < .001), with OL accounting for 37% of the variance in performance. The study demonstrates the value of OL in resource-constrained and institutionally fragmented environments. Practical implications encompass the cultivation of learning cultures within SOEs via adaptive leadership and knowledge-sharing frameworks. Theoretically, this study contributes to the literature on the role of OL in improving firm performance in developing economies.