Innovation Orientation and Firm Performance: The Role of Organizational Commitment among Commercial Banks in Meru County, Kenya

Abstract

Organizations have come to the realization of the important role played by employees in creating and sustaining competitive advantage and in that regard, strive to maintain a committed workforce. The research sought to better understand how organizational commitment influences both innovation orientation and commercial banks' performance in Meru County. Specific objectives included determining: influence of innovation orientation on performance; organizational commitment’s effect on innovation orientation; organizational commitment’s effect on performance; and the mediating effect of organizational commitment between innovation orientation and performance. The study's components were derived using three theoretical frameworks: resource-based theory, social exchange theory, and social technical theory. The study used cross-sectional descriptive design and target population was 261 workers from all commercial banks in Meru Town. The simple random sampling procedure was used to choose 158 employees as the sample size. Questionnaires were used to collect data. Reliability analysis was done using Cronbach alpha coefficient. The validity of the instrument was measured using content validity test. Descriptive statistics including mean, standard deviation and proportions were used to examine the data. Linear regression model showed the sequential relationship between variables at various stages of mediation test. Statistical tests including t-test and F-test formed the basis of testing the formulated hypotheses. Findings indicated that innovation orientation had a favorable and substantial influence on firm performance (β=0.59, p<0.05); and organizational commitment had a favorable and substantial influence on firm performance (β=0.189, p<0.05). Further, results showed that when combined, innovation orientation (β=0.589, p<0.05) and organizational commitment (β=0.187, p<0.05) had a favorable and substantial influence on firm performance. However, innovation orientation (p>0.05) had no substantial influence on organizational commitment. The study came to the conclusion that organizational commitment did not significantly mediate the relationship between innovation orientation and output of commercial banks since the second condition of mediation was broken. The study advised bank management to improve their initiatives to promote innovation. The programs should specifically focus on key aspects including employee innovativeness, customer, competitor and markets information innovation. The bank management should also strengthen their organizational commitment policy. The key areas to be streamlined include affective, normative and continuance commitment. Further, the bank management should develop programs and systems that can link innovation orientation and organizational commitment. These aspects when properly combined have the potential to enhance overall firm performance. The study significantly advances theory, practice, and policy in the area of corporate managemen