Knowledge Management Strategies and Performance of Commercial Banks in Kenya

Abstract

The purpose of this study was to understand the relationship between knowledge management strategies and performance of commercial banks in Kenya. Specifically, the researcher examined tacit-oriented, explicit-oriented, internal oriented and external- oriented knowledge management strategies and how the strategies related to performance of commercial banks. In contemporary knowledge-based organizations of today’s fast-moving sectors, banks are rated among the knowledge intensive firms. Such firms employ knowledge-oriented workers whose main task is to find creative solutions to complex problems and create new knowledge. Human capital is rated as the most important resource that has the capability to contribute to the bottom line of an organization. The resource is a means of improving financial as well as non-financial performance. The study examined the moderating role of strategic human resource management practices in the relationship. Further, the study focused on a descriptive analysis of the 43 commercial banks licensed by the Central Bank of Kenya (CBK) as at December 2017. The study relied on primary as well as secondary data, which helped the researcher to explain the study's findings, conclusions, and recommendations. The researcher targeted 30 respondents during pilot testing from five of the licensed microfinance banks by the CBK as at December 2017 and 384 respondents from the banks listed by CBK as at December 2017. The research design combined qualitative and quantitative methods. The target population was 43 banks and data were collected through a census. Management and staff from various operational departments and units in commercial banks and microfinance institutions served as the unit of analysis. The study used self-administered, semi-structured questionnaires to gather primary data. 296 valid replies were received. Descriptive statistics were used to analyse the data through the Statistical Package for Social Sciences. The research analysed data using multivariate regression model. In the regression model, tacit- oriented, explicit- oriented, internal-oriented and external–oriented knowledge management strategies were found to have a statistically significant influence on performance of commercial banks. The findings pointed out that the odds of commercial banks which has put knowledge management strategies in place were more than commercial banks without such strategies. The study concluded that banks that put in place a combination of strategies are likely to record better performance as opposed to banks that do not have such strategies in place. The study findings pointed out that the moderating effect of strategic human resource management practices offers commercial banks the opportunity to harness the strategies in place. Such measures significantly improve performance in turn. The study findings pointed out that external-oriented knowledge management (KM) strategy was the highest predictor of performance. Explicit-oriented KM strategy took the second position of this influence. Tacit-oriented KM strategy recorded a moderate effect while internal-oriented KM strategy was found to have the lowest impact on performance. The study therefore, recommends that banks use a combination of the strategies for better performance.