EFFECT OF STRATEGIC INNOVATION ON FIRM PERFORMANCE IN COMMERCIAL BANKS SECTOR IN KENYA
Abstract
The dynamic performance of the banking sector has been attributed to many factors, a good portion being common to firms in all industries, including social, economic, political, environmental, and cultural. In general, the banking sector is susceptible to the environmental factors, as well as internal factors. This work sought to study the implementation of strategic innovation and its influence on firm performance. The scope of the study was commercial banks in Kenya. The research objective was to determine the effect of strategic innovation on the firm performance of the commercial banks sector in Kenya. Specific research objectives were: to determine the influence of innovation process management on the firm performance; and to evaluate the effect of strategic alignment on the firm performance of commercial banks in Kenya. The study was anchored on the Disruptive innovation theory and the theory of the Blue Ocean Strategy. An analysis of both primary and secondary data was undertaken through multilinear regression with the help of Statistical Package for Social Sciences tool. Firm performance of the banks was informed by the Return on Assets for a period of five years. Strategic innovation was approached from the four dimensions of a managed innovation process, industry foresight, strategic alignment and customer insight. The study followed the descriptive research design. Data collection was carried out through semi-structured self-administered questionnaires for primary data and tabulated forms for the secondary data. The administered questionnaires tested reliable returning a Cronbach’s alpha coefficient of 0.7. The study population was 41 banks from which 10 were sampled using stratified sampling through proportionate and simple random sampling. 60 respondents made up of 10 respondents per selected bank across the 10 banks were targeted, with a response rate of 83 percent. From the findings, the study concludes that commercial banks’ implementation of innovation process management, strategic alignment, had a significant and positive effect on the firm performance of commercial banks in Kenya. The results of the analysis was presented using tables, figures and narratives. The study recommends that the management of commercial banks in Kenya should adequately finance the innovation process management which is capital intensive to accrue the benefits from this process full implementation. Management should continuously build the capacity of the employees to effectively execute the bank’s strategy that should be adaptable to the dynamic market forces. Further research was recommended to replicate the study across other financial institutions including insurance companies, SACCOs and micro-finance institutions.
Full Text:
PDFReferences
Agnihotri, A. (2016). Extending boundaries of blue ocean strategy. Journal of Strategic Marketing, 24(6), 519-528.
Baden Fuller, C., & Pitt, M. (2010). Strategic innovation. London: Thomson Learning.
Bagorogoza, J., & de Waal, A. (2010). The role of knowledge management in creating and sustaining high performance organisations: The case of financial institutions in Uganda. World Journal of Entrepreneurship, Management and Sustainable Development, 6(4), 307-324.Bakar & Ahmad, 2010
Baker, J., Jones, D. R., Cao, Q., & Song, J. (2011). Conceptualizing the dynamic strategic alignment competency. Journal of the Association for Information Systems, 12(4), 299.
Barney, J. B. (1986). Types of competition and the theory of strategy: Toward an integrative framework. Academy of management review, 11(4), 791-800.
Birkinshaw, J., Hamel, G., & Mol, M. J. (2008). Management innovation. Academy of management Review, 33(4), 825-845.
Business Dictionary, 2011
Chandler, G. N., & McEvoy, G. M. (2000). Human resource management, TQM, and firm performance in small and medium-size enterprises. Entrepreneurship Theory and Practice, 25(1), 43-58.
Christensen, C. (2013). The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business Review Press.
Coopers, P. (2008). Millennials at Work: Perspectives from a new generation. Managing Tomorrow’s People. December.
Day, G. S., & Wensley, R. (1988). Assessing advantage: a framework for diagnosing competitive superiority. The Journal of Marketing, 1-20.
Demirgüç-Kunt, A., Klapper, L. F., Singer, D., & Van Oudheusden, P. (2015). The global findex database 2014: Measuring financial inclusion around the world.
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
El-Awad, Z., Gabrielsson, J., & Politis, D. (2017). Entrepreneurial learning and innovation: The critical role of team-level learning for the evolution of innovation capabilities in technology-based ventures. International Journal of Entrepreneurial Behavior & Research, 23(3), 381-405.
Ghosh, R., Jain, J., & Dekhil, M. E. (2017). U.S. Patent No. 9,760,896. Washington, DC: U.S. Patent and Trademark Office.
Godin, B., & Lane, J. P. (2013). Pushes and pulls: Hi (S) tory of the demand pull model of innovation. Science, Technology, & Human Values, 38(5), 621-654.
Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ: pearson.
González-Páramo, J. M. (2017). Financial innovation in the digital age: Challenges for regulation and supervision. Revista de Estabilidad Financiera, 32, 30
Grant, A. M., & Ashford, S. J. (2008). The dynamics of proactivity at work. Research in organizational behavior, 28, 3-34.
Grant, R. M. (1999). The resource-based theory of competitive advantage: implications for strategy formulation. In Knowledge and strategy (pp. 3-23).
Gure, A. K., & Karugu, J. (2018). Strategic management practices and performance of small and micro enterprises in Nairobi City County, Kenya. International Academic Journal of Human Resource and Business Administration, 3(1), 1-26.
Hagedoorn, J. (1996). Innovation and entrepreneurship: Schumpeter revisited. Industrial and Corporate Change, 5(3), 883-896.
Hanafi, W. N. W., Daud, S., Islam, M. K., Bahrin, N. L., Ramli, A. A., & Isa, A. (2017). Blue Ocean Leadership and Employee Engagement. Advanced Science Letters, 23(9), 8723-8727.
Helfat, C. E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., & Winter, S. G. (2009). Dynamic capabilities: Understanding strategic change in organizations. John Wiley & Sons.
Ho, S. J., & Mallick, S. K. (2006). The impact of information technology on the banking industry: theory and empirics. Queen Mary, University of London, UK.
Hobday, M., Boddington, A., & Grantham, A. (2012). Policies for design and policies for innovation: Contrasting perspectives and remaining challenges. Technovation, 32(5), 272-281.
Iftekhar, H., Schmiedel, H., & Song, L. (2009). Return to retail banking and payments (Vol. 1135). Working Paper Series.
Jones, G. R. (2010). Organizational Theory, Design, and Change.
Kamukama, N., Ahiauzu, A., & Ntayi, J. M. (2010). Intellectual capital and performance: testing interaction effects. Journal of Intellectual Capital, 11(4), 554-574.
Kathuria, R., Joshi, M. P., & Porth, S. J. (2007). Organizational alignment and performance: past, present and future. Management Decision, 45(3), 503-517.
Kenya, F. S. D. (2013). Central Bank of Kenya (2013). FinAccess National Survey 2013: Profiling developments in financial access and usage in Kenya, Nairobi.
Kim, W., & Mauborgne, R. (2005). Blue Ocean Strategy: From Theory to Practice. California Management Review, 47(3), 105-121.
Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.
Kinyua, J. K. (2013). Central Bank of Kenya.
Kombo, D. K., & Tromp, D. L. (2009). Introduction to proposal writing. Nairobi: Pauline publications.
Kothari, C.R. (2004). Research methodology: methods and techniques, (2nded.). New Delhi. New Age International (P) Limited
Laforet, S. (2008). Size, strategic, and market orientation affects on innovation. Journal of business Research, 61(7), 753-764.
Leavy, B. (2018). Value innovation and how to successfully incubate “blue ocean” initiatives. Strategy & Leadership.
Leitner, K. H., & Güldenberg, S. (2010). Generic strategies and firm performance in SMEs: a longitudinal study of Austrian SMEs. Small Business Economics, 35(2), 169-189.
Lin, C. H., Peng, C. H., & Kao, D. T. (2008). The innovativeness effect of market orientation and learning orientation on business performance. International journal of manpower, 29(8), 752-772.Kenya Banking Act, Cap. 488
McKelvie, A., Brattström, A., & Wennberg, K. (2017). How young firms achieve growth: reconciling the roles of growth motivation and innovative activities. Small Business Economics, 49(2), 273-293.
McKeown, M. (2008). The truth about innovation. Pearson Education India.
Misati, R. N., Njoroge, L., Kamau, A., & Ouma, S. (2010). Financial innovation and monetary policy transmission in Kenya. International Research Journal of Finance and Economics, 50, 123-136.
Morrison, E. W. (2014). Employee voice and silence. Annu. Rev. Organ. Psychol. Organ. Behav., 1(1), 173-197.
Mugenda, O. & Mugenda , A. (2008). Research methods quantitative and qualitative approaches. Nairobi: Acts Press
Najmaei, A. (2010). Strategic Management of Strategic Innovation. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.1594430
Odhiambo, N. M. (2008). Financial depth, savings and economic growth in Kenya: A dynamic causal linkage. Economic Modelling, 25(4), 704-713.
O’Gorman, C. (2010). The sustainability of growth in small-and medium-sized enterprises. International Journal of Entrepreneurial Behavior & Research, 7(2), 60-75.
Ortt, J. R., & van der Duin, P. A. (2008). The evolution of innovation management towards contextual innovation. European journal of innovation management, 11(4), 522-538.
Palmer, D., & Kaplan, S. (2007). A Framework for Strategic Innovation: Blending strategy and creative exploration to discover future business opportunities. Retrieved May, 15, 2009.
Ravitch, S. M., & Riggan, M. (2016). Reason & rigor: How conceptual frameworks guide research. Sage Publications.
Richard, P. J., Devinney, T. M., Yip, G. S., & Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of management, 35(3), 718-804.
Roth, S., Melkonyan, A., Kaivo-Oja, J., Manke, B., & Dana, L. P. (2016). Interfunctional business models. Map grid for an uncharted quadrant of the Blue Ocean.
Sanders, J. (2014). Process Management, Innovation, and Efficiency Performance: The Moderating Effect of Competitive Intensity. Business Process Management Journal.
Santos, J. B., & Brito, L. A. L. (2012). Toward a subjective measurement model for firm performance. BAR-Brazilian Administration Review, 9(SPE), 95-117.
Schilling, M. A. (2010). Strategic management of technological innovation. Tata McGraw-Hill Education.
Sekaran, U. (2003). Towards a guide for novice research on research methodology: Review and proposed methods. Journal of Cases of Information Technology, 8(4), 24-35.
Serrat, O. (2017). Innovation in the Public Sector. In Knowledge Solutions (pp. 559-568). Springer, Singapore.
Simpson, W. G., & Kohers, T. (2012). The link between corporate social and financial performance: Evidence from the banking industry. Journal of business ethics, 35(2), 97-109.
Shrader, R., & Siegel, D. S. (2007). Assessing the relationship between human capital and firm performance: evidence from technology‐based new ventures. Entrepreneurship Theory and Practice, 31(6), 893-908.
Smith, W. K., & Tushman, M. L. (2005). Managing strategic contradictions: A top management model for managing innovation streams. Organization science, 16(5), 522-536.
Solans, E. D. (2003). Financial innovation and monetary policy. Excerpts of speech delivered at the 38th SEACEN Governors Conference and 22nd Meeting of the SEACEN Board of Governors on" Structural Change and Growth Prospects in Asia–Challenges to Central Banking", Manila (13 February 2003).
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2-3), 172-194.
Tidd, J., & Bessant, J. (2014). Strategic innovation management. Chichester: Wiley.
Todd, L. A. (2016). An exploration of Blue Ocean Strategy's capacity to sustain small businesses: A qualitative study (Doctoral dissertation, Capella University).
Trochim, W. M. (2006). Descriptive statistics.
World Bank’s Findex survey 2014
DOI: http://dx.doi.org/10.61426/sjbcm.v5i3.838
Refbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 3.0 License.
PAST ISSUES:
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.