The Mediating Effect of Innovative Work Behavior on the Relationship between Knowledge Management and Performance of Commercial Banks in Meru County

Abstract

The Kenya national government devolution strategy opened up the financial sector to diverse and competitive markets. As a strategy to respond to the fragmented emergent markets and innovate unique products and services commercial banks in Meru County need to leverage on knowledge economy. However, the ambiguity is in translating employees‟ tacit knowledge dimension into actual changes that can lead to process improvement. The purpose of this study was to explore the role knowledge management plays in enhancing perceived firm performance by examining the mediating effect of innovative work behavior of employees in the commercial banks in Meru County, Kenya. It hypothesized that there was no significant relationship between: knowledge management and firm performance; knowledge management and innovative work behavior, innovative work behavior and firm performance and no significant meditating effect of innovative work behavior on relationship between knowledge management and firm performance among commercial bank in Meru County. Knowledge-based view, diffusion innovation and Vroom‟s expectancy theories guided the study. Descriptive survey design was adopted. Data was collected from a cluster of twenty commercial banks with a population base of 213 within Meru town using a structured questionnaire. A sample size of 117 was surveyed and realized a 94% response rate. Clustered random sampling technique was used as the probability of being a cluster being chosen at any stage of sampling process was high clusters. Content and convergent validity ensured data quality, while cronbach's alpha value (0.7) was used to test the reliability of the research instrument. Data was analyzed using the SPSS software (version 22) and mean, standard deviation, and linear regression analysis were computed and presented using tables and figures. Linear regression analysis was applied in testing mediation and hypothesis. Results on mediation of the variable indicated that there was a strong positive correlation (R=65.2%, p-value of 0.000) between perceived firm performance and knowledge management. There was a moderate positive correlation between knowledge management and innovative work behavior. There was a moderate positive correlation between perceived firm performance and innovative work behavior. Finally, there was a strong positive correlation on perceived firm performance as influenced by both knowledge management innovative wok behavior. All had linear significant relationships. The beta coefficient of Knowledge Management was 0.939 before mediation and reduced to 0.806 in the presence of Innovative Work Behavior and the resultant model showed a partial mediation of innovative work behavior on perceived firm performance and knowledge management. It is concluded that knowledge management has a strong impact on performance of commercial banks in Meru. It was noted that employee knowledge is not utilized and is not well articulated within the banks in Meru. The study recommends for performance, banks need to appoint knowledge champions; in development of an innovative culture, they develop policies and manuals governing knowledge implementation, creativity and innovation as part of performance appraisals and allocation of budgets for knowledge management process. The findings imply that the knowledge economy is growing at unprecedented rate and it is paramount for commercial banks in Meru County synchronize it in their systems and processes.