Influence of Innovation Strategy on Competitiveness of Commercial Banks in Kenya

Abstract

The banking sector all over the world is going through a period characterized by radical and rapid changes as a result of opportunities arising from the adoption of information technology and electronic processing of data. Advancement in technology as well as increased level of competition from both local and foreign banks has shifted the existing sources of competitiveness to the banks as recent as ten years. Hence for banks to remain competitive, they need among others to be innovative in the operations and product offerings. The objective of the study was to determine the influence of innovation strategy on competitiveness of commercial banks in Kenya. The five themes of innovation strategy that were investigated include aggressive, analyzer, futuristic, risk taking and defensive strategy. Towards the realization of the research objective, the research adopted a descriptive cross-sectional research design. The target population were the 41 commercial banks operating in Kenya. The findings suggest that the banks undertake products innovation with a long term perspective in mind with the ability match market demands in future as well as encouraging coordination of the various departments and also tailoring their innovations to the possible changes to the direction that technological advancement might take in future. From the regression findings, the results show that there exist a strong positive correlation between the innovations adopted by the banks and their level of competitiveness. The aggressive strategy was found to significantly affect the bank level of competitiveness in comparison with the other innovation strategies implying that the Kenyan banks should consider directing their effort to adopting aggressive innovation strategy.