Product Innovation Strategy and the Competitiveness of Kenyan Commercial Banks

Abstract

Purpose: This study investigated the effect of product innovation strategy on the competitiveness of Kenyan commercial banks and was anchored on Schumpeter’s Innovation Theory and the Value Innovation Theory,

Methodology: The study adopted a positivist philosophy and descriptive-correlational design. Primary data were collected from bank executives, complemented by secondary data from the Central Bank of Kenya.

Findings: Bivariate regression analysis established that product innovation strategy has a positive and statistically significant effect on competitiveness (R² = 0.108, F(1,134) = 16.147, p < .001). The results demonstrated that product innovation had a positive and statistically significant influence on competitiveness, indicating that banks that introduce new or improved products are more likely to achieve competitive advantage. The findings confirm that product innovation is a key lever of competitiveness, enabling banks to differentiate offerings, enhance customer satisfaction, and strengthen market position. The study recommends that banks invest in product development capacity while regulators create an enabling environment for innovative yet responsible product introduction.

Unique Contribution to Theory, Policy and Practice: This study contributes to knowledge by demonstrating that product innovation strategy significantly enhances the competitiveness of commercial banks. Theoretically, it extends Schumpeter’s Innovation Theory and Value Innovation Theory to the context of emerging financial markets. From a policy perspective, it provides evidence for regulators to create frameworks that encourage responsible innovation while safeguarding consumers. Practically, it informs banking practitioners that investing in product development and innovative offerings is a strategic approach to achieving market differentiation, improved customer satisfaction, and sustained competitive advantage.