Strategic Flexibility, Market Dynamism and Performance of Commercial Banks in Nairobi City County, Kenya

The purpose of this study was to investigate the effect of strategic flexibility, market dynamism on the performance of commercial banks in Nairobi City County, Kenya. In a competitive and dynamic financial landscape, commercial banks must effectively adapt to market changes to sustain their performance. The evolving nature of customer demands and regulatory requirements highlights the need for a deeper understanding of strategic flexibility. The study focused on four key objectives: examining the effect of organizational agility, strategic partnerships, and Innovation adoption on bank performance, as well as exploring how market dynamism moderates these relationships. The study was anchored on Resource-Based View, Organizational Agility, Innovation adoption and Contingency theories. The study adopted pragmatic research philosophy

and employed a mixed-methods design. Data was collected using the structured questionnaires and semi-structured interviews. Pilot study was carried out in the commercial banks in Kakamega County. A reliability analysis and a rigorous validation process was conducted using Cronbach Alpha which were above the threshold of 0.7. Their results supported the use of the research instruments and enhanced the credibility of the study’s findings. Data was gathered from 186 banks managers and operational managers. The findings revealed that organizational agility has a significant positive effect on bank performance, explaining 33.4% of the variance. Additionally, strategic partnerships and Innovation adoption also play crucial roles, accounting for 21.4% and

26.8% of the variance, respectively. Importantly, market dynamism was found to significantly moderate the relationship between strategic flexibility and bank performance. These results contribute valuable insights for banking executives, regulatory bodies, and academic researchers. For executives, understanding how organizational agility, strategic partnerships, and Innovation adoption can drive performance is essential for developing strategic flexibility capabilities. Regulatory bodies can use these insights to formulate policies that support the banking sector’s

adaptability and resilience. Meanwhile, academic research can further explore the theoretical connections between strategic management and dynamic environments. Based on the findings, several key recommendations emerge for commercial banks in Kenya. Firstly, there is a need to prioritize the development of organizational agility to enhance responsiveness to market changes. Secondly, fostering strategic partnerships should be emphasized to capitalize on new opportunities. Thirdly, continuous investment in Innovation adoption is essential to remain competitive in a fast-paced environment. Finally, banks should enhance their ability to adapt to market dynamics through regular assessments and flexibility in strategic planning. Implementing these strategies will position banks to achieve superior performance amid evolving competitive pressures.