EFFECT OF INNOVATION STRATEGIES ON FINANCIAL PERFORMANCE OF THE BANKING INDUSTRY IN KENYA

Robert Gitau Muigai, Sarah Njeri Gitau

Abstract


Globalization and increasing market competitiveness have driven financial institutions toward innovativeness in their operation to gain sustainable competitive advantage and improve their financial performance. Financial institutions are not only competing on the basis of services but also on the basis of physical products as it is hard to distinguish between products of competing brands in a given product category. The increased competition in the banking industry in Kenya has led to the players in the industry to find alternative ways of surviving and performing well such as adopting innovative strategies. This study sought to establish effect of innovation strategies on financial performance of firms in the banking industry in Kenya. The study specifically focused on product innovation and organizational innovation and its effect on financial performance in the banking industry in Kenya. This study adopted a descriptive survey as the research design for the purposes of data collection. The population targeted 153 managers in ICT department, retail banking department and corporate banking departments from the 51 financial institutions headquarter in Nairobi. The study made use of both secondary and primary data that was obtained from the study respondents using a structured questionnaire. The study used both descriptive statistics such frequency distributions, percentages, frequency tables and pie charts to summarize and relate variables obtained from the administered questionnaire as well as inferential statistics of correlation and regression for analysis. Findings revealed that product innovation and organizational innovation strategies positively and significantly affect the financial performance of firms in the banking industry in Kenya. The study recommends the banking industry in Kenya to introduce new products and services, improvement of existing products and services since it improves their financial performance. There is also need for the banking industry in Kenya to offer a wide range of products than their competitors. The study recommends the banking industry in Kenya to adopt E-customer information data base as well as call centres and floor management. There is also a need for the firms in the banking industry to adopt computerized loan document generation, automated voice response, and automated cheque reconciliation systems as it increases the financial performance. The study further recommends the firms to centralize their loan application system and Electronic trading of shares so as to increase their competitive advantage.

 

JEL: G21, L23, M21

 

Article visualizations:

Hit counter

DOI

Keywords


product innovation, organizational, innovation, financial performance, banking industry in Kenya

Full Text:

PDF

References


Aarikka-Stenroos, L., & Jaakkola, E. (2012). Value co-creation in knowledge intensive business services: A dyadic perspective on the joint problem solving process. Industrial marketing management, 41(1), 15-26.

Baker, W. E., & Sinkula, J. M. (2007). Does market orientation facilitate balanced innovation programs? An organizational learning perspective. Journal of product innovation management, 24(4), 316-334.

Battisti, G., & Stoneman, P. (2010). How innovative are UK firms? Evidence from the fourth UK community innovation survey on synergies between technological and organizational

Chou, H., 2009. The effect of market orientation intention and superiority on new product performance. The Journal of American Academy of Business, 14(2), 93-97.

Daft, R. L., & Marcic, D. (2013). Building management skills: An action-first approach. Cengage Learning.

Dauda, Y. A., & Akingbade, W. A. (2011). Technology innovation and Nigeria banks performance: The assessment of employee’s and customer’s responses. American Journal of Social and Management Sciences, 2(3), 329-340.

De Brito Cruz, C., L. de Mello, 2006, Boosting innovation Performance in Brazil, OECD Economic Department Working Paper.

Desai, M. & Low, M. (1987). Measuring the opportunity for product innovation, in M.de Cecco (de.), Changing Money: Financial Innovation in Developed Countries. Basil Blackwell, Oxford, 1987.

Furrer, O., Thomas, H. & Goussevskaia, A. (2008). The structure and evolution of the strategic management field: a content analysis of 26 years of strategic management research. International Journal of Management Reviews, 10(1), 1–23.

Hofer, C., Jin, H., Swanson, R. D., Waller, M. A., & Williams, B. D. (2012). The impact of key retail accounts on supplier performance: A collaborative perspective of resource dependency theory. Journal of Retailing, 88(3), 412-420.

Hong, T. L., Cheong, C. B., & Rizal, H. S. (2016). Service Innovation in Malaysian Banking Industry towards Sustainable Competitive Advantage through Environmentally and Socially Practices. Procedia-Social and Behavioral Sciences, 2(6), 224, 52-59.

Hoyer, W. D., Chandy, R., Dorotic, M., Krafft, M., & Singh, S. S. (2010). Consumer cocreation in new product development. Journal of service research, 13(3), 283-296.

Hubbard, G. (2009). Measuring organizational performance: beyond the triple bottom line. Business strategy and the environment, 18(3), 177-191.

Kearns, G. S., & Lederer, A. L. (2003). A resource‐based view of strategic IT alignment: how knowledge sharing creates competitive advantage. Decision sciences, 34(1), 1-29.

Kiiyuru, K. D. (2014). Effects of innovation strategies on performance of commercial banks in Kenya (Doctoral dissertation, School of Business, University of Nairobi).

Mairesse, J., & Robin, S. (2009). Innovation and productivity: a firm-level analysis for French Manufacturing and Services using CIS3 and CIS4 data (1998-2000 and 20022004). Paris: CREST-ENSAE

Majeed, S. (2011). The impact of competitive advantage on organizational performance. European Journal of Business and Management, 3(4), 191-196.

Musembi, D. M., Ali, B., & Kingi, W. (2016). Effect of Liquidity Risk Determinants on the Financial Performance of Commercial Banks Listed At the Nairobi Securities Exchange. Imperial Journal of Interdisciplinary Research, 2(11), 8-23

Muthoni, M. G. (2013). The effect of marketing innovation of financial performance of insurance companies in Kenya. Unpublished MBA Project, University of Nairobi

Njiffla, N. N. (2009). Strategic responses of Kenya Commercial Bank limited to changes in the Kenyan banking industry (Masters Dissertation, University Of Nairobi).

O’sullivan, D., & Dooley, L. (2009). Applying innovation. California: Sage Publications Inc

Oke, A. (2007). Innovation types and innovation management practices in service companies. International Journal of Operations & Production Management, 27(6), 564-587.

Patrick, D, (2011). Relationship between financial innovation and financial performance of commercial in Kenya, Unpublished MBA Project, Kenyatta University.

Porter, M. E. (1991). Capital disadvantage: America’s failing capital investment system. Harvard Business Review, 70, 65-82.

Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.

Priem, R. L., & Butler, J. E. (2001). Is the resource-based “view” a useful perspective for strategic management research? Academy of management review, 26(1), 22-40.

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.

Shergill, G., and Nargundkar. R., 2005. Market orientation, marketing innovation as performance drivers: extending the paradigm. Journal of Global Marketing, 19(1), pp.27-44.

Smart, P. A., Maddern, H., & Maull, R. S. (2009). Understanding business process management: implications for theory and practice. British Journal of Management, 20(4), 491-507.

Tidd, J., Besant, J. & Pavitt, K.(2011). Managing Innovation; integrating technology, market and organizational change, 2nd edition, John Wiley & Sons Ltd. Westsussex, England.

Walumbwa, F. O., Avolio, B. J., & Aryee, S. (2011). Leadership and management research in Africa: A synthesis and suggestions for future research. Journal of Occupational and Organizational Psychology, 84(3), 425-439.

Zewdia, G. H. (2013). The Effects of Financial Innovation on the Financial Performance of Listed Commercial Banks in Kenya, Unpublished MBA Projects, University of Nairobi.


Refbacks

  • There are currently no refbacks.


Copyright (c) 2018 Robert Gitau Muigai, Sarah Njeri Gitau

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

The research works published in this journal are free to be accessed. They can be shared (copied and redistributed in any medium or format) and\or adapted (remixed, transformed, and built upon the material for any purpose, commercially and\or not commercially) under the following terms: attribution (appropriate credit must be given indicating original authors, research work name and publication name mentioning if changes were made) and without adding additional restrictions (without restricting others from doing anything the actual license permits). Authors retain the full copyright of their published research works and cannot revoke these freedoms as long as the license terms are followed.

Copyright © 2015 - 2018. European Journal of Economic and Financial Research (ISSN 2501-9430) is a registered trademark of Open Access Publishing GroupAll rights reserved.

This journal is a serial publication uniquely identified by an International Standard Serial Number (ISSN) serial number certificate issued by Romanian National Library. All the research works are uniquely identified by a CrossRef DOI digital object identifier supplied by indexing and repository platforms. All the research works published on this journal are meeting the Open Access Publishing requirements and standards formulated by Budapest Open Access Initiative (2002), the Bethesda Statement on Open Access Publishing (2003) and  Berlin Declaration on Open Access to Knowledge in the Sciences and Humanities (2003) and can be freely accessed, shared, modified, distributed and used in educational, commercial and non-commercial purposes under a Creative Commons Attribution 4.0 International License. Copyrights of the published research works are retained by authors.