Influence of Strategic Management Practices on Internal Innovation in Commercial Banks in Kenya
Abstract
In today’s rapidly evolving financial landscape, internal innovation has become a critical driver of competitiveness in the commercial banking sector. The study examined the influence of strategic management practices on internal innovation in commercial banks in Kenya. Specifically, it analyzed the roles of organizational culture, leadership engagement, resource allocation, and incentive systems. A mixed-methods design was employed, integrating quantitative and qualitative approaches. A total of 144 questionnaires were distributed to the sampled respondents, out of which 115 were duly completed and returned, representing a response rate of 80%. The data obtained was analyzed using both descriptive and inferential statistical methods. The results revealed that organizational culture, leadership engagement, resource allocation, and incentive systems each had a statistically significant positive influence on internal innovation (p < 0.05). Tier analysis showed that these effects were strongest in Tier 1 banks, reflecting greater structural and resource capacity. Organizational readiness further moderated the relationship between strategic management practices and innovation, highlighting the importance of adaptability. The study recommends that commercial banks establish innovation budgets, strengthen leadership involvement, align culture with innovation goals, and implement transparent incentive systems to enhance innovation and sustain competitiveness. This study contributes to the literature by providing tier-based evidence on how strategic management practices shape innovation in Kenya’s banking sector.
Keywords: Internal innovation, strategic management practices, organizational culture.
References
[1] Central Bank of Kenya (2023). Bank supervision annual report 2022. Nairobi: CBK.
[2] Teece, D. J. (2018). Business models and dynamic capabilities. Long Range Planning, 51(1), 40–49. https://doi.org/10.1016/j.lrp.2017.06.007
[3] Johnson, M., Smith, R., & Brown, K. (2021). Organizational culture and creativity in financial institutions: A cross-national study. International Journal of Innovation Management, 25(6), 1–20. https://doi.org/10.1142/S1363919621500561
[4] Rieger, V. (2022). The effect of cooperative team culture on innovation. Journal of Business Research, 144, 1256-1271. https://doi.org/10.1016/j.jbusres.2022.02.020
[5] Zaheer, A., & Bell, G. G. (2021). Top management knowledge value, knowledge sharing practices, open innovation and organizational performance. Journal of Business Research, 128, 788–798. https://doi.org/10.1016/j.jbusres.2019.04.040
[6 ] Schein, E. H. (2017). Organizational culture and leadership (5th ed.). Hoboken, NJ: Wiley.
[7] Johnson, G., Scholes, K., & Whittington, R. (2021). Exploring corporate strategy (12th ed.). Pearson Education.
[8] Mutua, D. (2019). The role of organizational culture in SME innovation: Evidence from Kenya. International Journal of Business and Social Science, 10(3), 112–120.
