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. This 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.