EFFECT OF INNOVATION STRATEGIES ON COMPETITIVE ADVANTAGE OF THE BANKING INDUSTRY IN KENYA

Abstract

Globalization and increasing market competitiveness have driven financial institutions toward innovativeness in their operation to gain sustainable competitive advantage. 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. This study sought to establish effect of innovation strategies on competitive advantage of the banking industry in Kenya. The study specifically focused on product innovation, process innovation, marketing innovation as well as organizational innovation and their effect on competitive advantage of 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 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, process innovation, marketing innovation and organizational innovation strategies positively and significantly influence the competitive advantage of the banking industry in Kenya. The study concluded that product innovation strategies influence the competitive advantage of the banking industry in Kenya. The study recommends the banking industry in Kenya to improve their systems of operation as it increases their competitive advantage. The study further recommends the banking industry to adopt new processes. The study also recommends the banking industry in Kenya to improve the existing processes and adopting new methods of service provision since it increases their competitive advantage.