Examining the Effect of Dynamic Capability, Service Multichannel Integration Quality, and Environmental Dynamism on Firm Performance in the Case of Commercial Bank of Ethiopia

Major Advisor: Chalchissa Amentie (Ph.D., Associate Professor) Co-advisor: Missganu Getahun (Ph.D., Assistant Professor) This study examined the effects of dynamic capability (DC), multichannel integration quality (MCIQ), and environmental dynamism (ED) on bank performance (BP) in the case of the Commercial Bank of Ethiopia (CBE). This research was conducted in the Ethiopian banking sector due to the relatively low performance of the banks. To investigate this, the study employed a systematic review and sequential explanatory research using a mixed-methods approach. For both quantitative and qualitative, the primary data were collected from 241 bank employees through a structured questionnaire, of which 235 were valid and used for analysis. Qualitative data were gathered through interviews from seven bank managers. The collected data were analyzed using descriptive and inferential analysis. Descriptive analysis was conducted using means, standard deviations, and t-tests via SPSS version 25, while inferential statistics were conducted using structural equation modeling (SEM) - AMOS version 23 to test mediation and moderated mediation models. Additionally, qualitative data were analyzed using thematic analysis. More mixed-method findings were integrated and narratively interpreted. Accordingly, results from the systematic review confirmed the critical role of DC in improving firm success in dynamic environments. Descriptive analysis revealed that all variables (DC, MCIQ, ED, and BP) had mean scores above the average of 2.5 on a 5-point scale and were statistically significant, indicating CBE’s application of these constructs to enhance performance. Further, the mediation analysis revealed that MCIQ partially mediates the relationship between DC and BP (β= 0.12, p=0.015), while the moderated mediation model demonstrated that ED significantly moderates the indirect relationship between DC and BP through MCIQ, with an effect size of 0.076 (p=0.000) and a confidence interval of 0.040 to 0.126, confirming significance as the interval does not include zero. Furthermore, qualitative findings affirmed that CBE utilizes both DC and MCIQ under conditions of ED to enhance performance, aligning with the quantitative results. The study concludes that all examined variables significantly influence bank performance in the Ethiopian service sector context. While CBE is actively adapting to environmental dynamism, greater emphasis should be placed on enhancing MCIQ through the effective utilization of DC, which can help banks remain competitive and improve long-term performance. Finally, the study offers a valuable research agenda for future investigations in the banking service industry. Keywords: Bank performance, dynamic capability, environmental dynamism, multichannel Integration quality, sequential explanatory design, systematic review