Innovation Strategies and Operational Performance of Registered Commercial Banks in Kenya

Globalization, technological advancement, and unpredictable competition have remarkably impacted the dynamic banking sector worldwide. Stiff competition among commercial banks in Kenya has compelled the actors to implement novel approaches to gain and sustain a competitive advantage. However, banks’ dismal performance persists, signaling potential challenges undermining operational efficiency. This study examined the effect of innovation strategies on registered commercial banks in Kenya. The specific focus was on proactive, active, reactive and passive innovation strategies. The study employed a descriptive survey design. The target population was the 39 commercial banks, as reported by the Central Bank of Kenya in 2025. The data collection tool was a structured questionnaire. A pilot study was conducted among the Kenya Bankers Association Officials. The bivariate analysis results indicate that innovation strategies affect the operational performance of commercial banks. The four innovation strategies were effective as a unified construct rather than isolated strategies. Although each innovation dimension showed a positive relationship with operational performance at the bivariate level, their effects were not independently significant in the multiple regression model. Similarly, proactive innovation was the dominant component in operational performance. The study concluded that innovation strategies play a significant role in enhancing the operational performance of commercial banks. The various innovation strategies were highly interrelated and collectively influenced operational performance rather than operating in isolation. The study recommended a holistic innovation approach supported by adequate ICT infrastructure, skilled personnel, and strong managerial commitment. The study further recommended increased investment in digital and technological infrastructure, strengthened process automation and reengineering, enhanced staff capacity and innovation culture, customer-centric product innovation, and strengthened risk management and cybersecurity frameworks.