STRATEGIC INNOVATION AND COMPETITIVENESS OF COMMERCIAL BANKS IN KENYA

Abstract

The dynamics of change in the business environments catalysed by globalization, changing consumer preferences and whirlwind development of technology have exerted immense pressure on commercial banks to develop strategies for sustainability. Strategic innovation has thus become the vital tool for survival and development. This study examined the influence of strategic innovation on the competitiveness of Commercial Banks in Kenya. The study was guided by the following research objectives: To identify the influence of product innovation on competitiveness of commercial banks in Kenya, to investigate the influence of marketing innovation on competitiveness of commercial banks in Kenya, to establish the influence of service innovation on competitiveness of commercial Banks in Kenya, to examine the influence of managerial innovation on competitiveness of commercial Banks in Kenya and to determine the moderating influence of environmental factors on the relationship between strategic innovation and competitiveness of commercial banks in Kenya. The study was guided by Creative Destruction theory and supported by RBV, Dynamic Capability and Contingency theories. The study utilized a positivist research philosophy. Descriptive and correlational research designs were used. The target population consisted of 175 directors and general managers of tier one commercial banks based in head office and in the following departments: R&D, Marketing and Communication, Customer Service, Credit and Payments. Banks were classified into tiers through stratified sampling. Managers were classified into directors and general manager levels. Simple random sampling was then employed to select 122 respondents. Primary data was collected using closed and open-ended questionnaires. A pilot study was conducted in Equity bank. To ensure content validity, the research questionnaire was subjected to thorough examination by two university supervisors and two experts from bank sector. The study adopted Principal Component Analysis approach to test for the construct validity. Descriptive and inferential analysis was utilized. Descriptive analysis included the use of frequencies, percentages, mean and standard deviation while inferential statistics employed correlation and regression analyses. Correlation was done using Pearson’s product moment while regression was conducted using simple linear regression, multiple regression and hierarchical regression models. Data collected from open ended questionnaire was analyzed using content analysis. Results were presented in form of tables, graphs and pie charts. The study found out that product innovation, market innovation, service innovation and managerial innovation influenced competitiveness of commercial banks in Kenya. The study similarly concluded that product innovation had the most significant influence on commercial banks competitiveness followed by market innovation. The study equally revealed that environmental factors moderated the relation between strategic innovation and competitiveness of commercial banks in Kenya. The findings may help various policy makers with vital recommendations to enhance adoption and implementation of strategic innovation activities in the banking sector in Kenya. The results of this study also add into the pool of knowledge in the field of strategic management through appreciation of the role of strategic innovation on attainment of competitiveness in firms. The study thus recommends that commercial banks apply practices associated with product innovation, market innovation, service innovation and managerial innovation to improve competitiveness.