ABSTRACT
Strategy is the direction and scope of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders’ expectations. However, research on predictive power of innovative strategies on the performance of firms listed in the NSE is inadequate. This study aimed at exploring this area in the hope of providing important answers to how innovation can be used to leverage performance of organizations in Kenya. The general objective of the study was to investigate effects of various innovation strategies on the performance of firms listed in the NSE. The study adopted a descriptive and inferential research design; the target population for the study was the 61 organizations, where a sample of 53 respondents were selected using simple random sampling technique. In order to collect the relevant data, a semi-structured questionnaire was used. To ascertain the validity and reliability of questionnaire, a pilot survey was conducted. The questionnaires were administered to the sampled respondents. Statistical analyses were conducted using statistical package for social sciences (SPSS) to calculate descriptive statistics, analysis and regression. The Model summary of the regression analysis showed that all the independent variables accounted for 72.4% of the variance in firm performance. Technological strategies, Product development strategies, market strategies and Process strategies were found to have a positive correlation with the performance of firms in NSE. The study recommended that Firms in service industry could make significant gains by pursuing product and process innovations. This is because the impact on performance is much more significant given the nature of the industry. Technological innovations rank higher probably because the market has matured and hence cost savings derived from innovative processes become more attractive for growth.
CHAPTER ONE
INTRODUCTION
Background of the Study
There have been major and unpredictable changes in the business environment that no matter how successful and superior a company’s current business model has been, it will be easily imitated, diluted and commoditized by others and challenged by new business models in the innovation economy (Gitonga, 2003). There are competitors who may introduce new superior methods of production, change the ways in which they compete for business, extend their target markets and find new ways of attracting key employees. Many companies have surprisingly little notion of where their industry is heading, rarely looking beyond their own boundaries, too busy fighting today’s fires to take the time to truly understand what is driving their operating environment and how it may evolve (Kihumba, 2008).
In today’s dynamic and global competitive environment, innovation is becoming more pertinent for organization, mainly due to three major trends: concentrated international competition, disjointed and challenging markets, and assorted and swiftly changing technologies (Kim & Mauborgne, 1999). In the present economic environment the invention of an entirely new business model or the radical redesign of existing business models is the only way companies can grow and wealth can be created (Hamel & Välikangas, 2003). It is essential to have a clear understanding of a company’s ability to act upon and implement innovative ideas and strategies, and to successfully come to grips with the operational, political, cultural and financial demands that will follow (Cross et al, 2003).
Innovation Strategy
Strategy is the direction and scope of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholders’ expectations. Innovation strategy in any business or industry involves aligning the product life cycles of the company with their various research and development activities. Oke and Goffin (2001) posited that the first stage in formulating an innovation strategy is to describe what innovation means to the institution or the focus areas in terms of innovation. By comprehending the drivers of innovation needs, a company can expand its focus areas for innovation.
The significance of having an obviously defined innovation strategy directing the innovation process was documented by Griffin (1997) and Cooper, Scott, and Kleinschmidt (2002). Innovation strategy gives a clear direction and concentrates the effort of the whole organization on a common innovation end. The innovation strategy should specify how the significance of innovation will be communicated to all the employees to attain their buy-in and must openly reflect the significance that management places on innovation and the alignment to overall business strategy. The management of high performing institutions was tangibly and visibly committed to new product development and overtly formulated and communicated the institution’s new product development strategy (Bessant & Francis, 1999).
Firm Performance
Firm’s performance is the appraisal of prescribed indicators or standards of effectiveness, efficiency, and environmental accountability such as productivity, cycle time, regulatory compliance and waste reduction. Performance also refers to the metrics regarding how a certain request is handled, or the act of doing something effectively; of performing; using knowledge as notable from just possessing it. It is the result of all of the organization’s operations and strategies (Clarke, Davies & Waterson, 2000). It is also the level to which an individual fulfills the expectations concerning how he should behave or function in a certain situation, context, circumstance or job. Oakland (1999) posited that performance is what individuals do relating to institutional roles.
The financial performance of companies is usually measured using a blend of financial ratios analysis, measuring performance alongside budget, benchmarking or a combination of these methodologies. The common postulation, which explains most of the financial performance discussion and research, is that increasing financial performance will result in improved functions and actions of the firms. The topic of financial performance and investigation into its measurement is well advanced in management and finance fields. It can be argued that there are three principal factors to advance financial performance for financial firms; the institution size, the institution asset management, and the institution operational efficiency (Fitzgerald, Johnston, Brignall, Silvestro & Voss, 2000).
Nairobi Securities Exchange
The Nairobi Securities Exchange previously known as Nairobi Stock Exchange was formed in 1954 as a voluntary organization of stock brokers and is now one of the most active capital markets in Africa. The administration of the Nairobi Securities Exchange Limited is located on the 1st Floor, Nation Centre, Kimathi Street, Nairobi. As a capital market institution, the Stock Exchange plays an important role in the process of economic development. It helps mobilize domestic savings thereby bringing about the reallocation of financial resources from dormant to active agents. Long-term investments are made liquid, as the transfer of securities between shareholders is facilitated. The Exchange has also enabled companies to engage local participation in their equity, thereby giving Kenyans a chance to own shares. There are as of December 2009, 50 companies listed at the securities exchange (www.nse.co.ke, 2014).
Members of the Nairobi Securities Exchange transact business within the Nairobi stock market, with a limited proportion of business conducted in foreign securities through overseas agents. The stockbrokers act as financial advisers to their clients and carry out their orders. The Nairobi Securities Exchange deals in both variable income securities and fixed income securities. Variable income securities are the ordinary shares, which have no fixed rate of dividend payable, as the dividend is dependent upon both the profitability of the company and what the Board of Directors decides. The fixed income securities include Treasury and Corporate Bonds, preference shares, debenture stocks - these have a fixed rate of interest/dividend, which is not dependent on profitability (www.nse.co.ke, 2009). The Securities Exchange is a market that deals in the exchange of securities issued by publicly quoted companies and the Government. The major role that the securities exchange has played, and continues to play in many economies is that it promotes a culture of thrift, or saving. The securities exchange assists in the transfer of savings to investment in productive enterprises as an alternative to keeping the savings idle.
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Item Type: Kenyan Topic | Size: 53 pages | Chapters: 1-5
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