REINVENTING BANKING PERFORMANCE THROUGH INNOVATION STRATEGY: EMPIRICAL EVIDENCE FROM COMMERCIAL BANKS IN NAIROBI CITY COUNTY, KENYA
Andrew Karogo Waweru - Master of Business Administration Candidate, School of Business, Economics and Tourism, Kenyatta University, Kenya
Paul Waithaka (PhD) - Lecturer, School of Business, Economics and Tourism, Kenyatta University, Kenya
ABSTRACT
Commercial banking is increasingly shaped by technological disruption, changing customer expectations, fintech competition, regulatory demands, and the need for efficient service delivery. In Nairobi City County, commercial banks operate in a highly competitive financial environment in which sustained performance increasingly depends on the capacity to innovate and translate technological and service innovations into organizational value. This study examined the effect of innovation strategy on the performance of commercial banks in Nairobi City County, Kenya. The study is anchored on the Resource-Based View, while organizational performance is conceptualized using the Balanced Scorecard perspective. A descriptive survey design was adopted. The target population comprised 350 employees drawn from Tier 3 commercial bank branches in Nairobi City County, from which a sample of 187 was selected using Yamane’s formula and purposive stratified sampling. Data were collected using a semi-structured questionnaire, with 164 usable responses returned, representing an 87.7% response rate. Descriptive statistics were summarized using means and standard deviations, while inferential analysis employed multiple linear regression at a 5% significance level. Qualitative data was analyzed using thematic analysis. The findings showed a high level of implementation of innovation strategy (M = 4.26, SD = 0.77). Regular implementation of digital banking solutions recorded the highest mean (M = 4.41), followed by technology integration in operational improvement (M = 4.36). Regression results indicated that innovation strategy had a positive and statistically significant effect on organizational performance (β = 0.318, t = 4.297, p < .001), and it recorded the strongest coefficient among the corporate-level strategies included in the broader model. The study concludes that innovation strategy is a significant performance lever in commercial banking and recommends sustained investment in digital platforms, technology integration, service innovation, technological benchmarking, and an organizational culture that supports continuous innovation.