Dynamic capabilities and performance of commercial banks in Nairobi city county, Kenya
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Date
2026-09
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Kenyatta University
Abstract
Commercial banks play a crucial function in enabling economic activities and ensuring financial stability within an economy. However, despite their undeniable significance, they have grappled with performance obstacles, as evidenced by a downturn in profitability, fluctuating returns on assets, market share volatility, and inconsistent returns on equity. This research intends to determine the effect of dynamic capabilities on the profitability of commercial banks in Nairobi City County, Kenya. Specifically, the study confirmed the influence of innovative capability, technical knowledge ability, learning culture ability, and service quality ability on the performance of commercial banks in Nairobi City County, Kenya. The study was supported by four frameworks: Dynamic Capabilities Theory, Resource-Based View Theory, Organizational Learning Theory, and the Balanced Scorecard Theory. This research employed a descriptive research design along with a purposeful sampling method. The intended audience consisted of 38 commercial banking institutions located in Nairobi City County, Kenya. A total of 228 employees working at these commercial banks participated in the survey. In this study, participants were categorized based on their different departments. A straightforward random sampling method was employed to choose participants from each group, ensuring that every individual in the population has an equal opportunity for selection. The group included 102 employees. Semi-structured questionnaires were employed for data collection, utilizing a drop-off and pick-up method later. Face and content validity were assessed by obtaining expert opinions, while reliability was evaluated using Cronbach's alpha, with a threshold of 0.7 deemed acceptable. The information was examined using descriptive statistics and multiple regression methods, with the results presented in tables, charts, and graphs. Ethical issues such as confidentiality and voluntary involvement were tackled to safeguard participants' rights and privacy. In general, the study seeks to clarify how dynamic capabilities can enhance the performance of commercial banks, providing significant insights for industry professionals and policymakers within the banking field. The capacities for innovation, technical knowledge, service quality, and learning culture were identified as having a significant positive impact on the performance of commercial banks in Nairobi City County, Kenya. The research finds that innovative abilities allow banks to automate repetitive tasks, which decreases the time and resources needed for operations. Technical expertise allows banks to utilize data analytics to comprehend customer preferences and behaviors. Cultural competence allows bank employees to engage effectively with clients from various backgrounds, building trust and rapport. Excellent service quality results in enhanced customer satisfaction, which subsequently promotes loyalty. Content customers are more inclined to stay with their bank, lowering churn rates. The research suggests that banks ought to improve and advance their mobile and online banking systems to ensure smooth customer experiences. Financial institutions ought to conduct workshops and seminars facilitated by industry specialists to address new trends, regulatory updates, and technological progress in banking. The leaders of the bank need to express a clear vision that highlights the significance of ongoing learning and growth. The banks ought to conduct regular training sessions for staff to enhance their abilities in customer service, product expertise, and communication
Description
Research project submitted in partial fullfilment of the requirements for the award of the degree of master of business administration (strategic management) of Kenyatta university,
September 2025
Supervisor:
Dr. Anne W. Muchemi