Influence of absorptive capability on organizational performance of tier two commercial banks in Kenya

Abstract

Firms that clearly understand their mandate are more easily able to understand their customers and hence are in a better position to create products that correctly fit in with the market needs and withstand competition. Most firms in the same industry operate under similar environments, however, the ability of a firm to understand its surroundings and take up the opportunities around it and at the same time minimize its threats within certain acceptable time limits, brings out to a large extent the difference between performance of one firm and the other in a similar industry. This study was anchored on the competitive theory as advanced by Michael Porter. A descriptive approach was used by explaining the data and characteristics of the population being studied. The study targeted a total of 64 respondents. This study did not sample the tier two commercial banks because they are few and hence a census was adopted. A pilot test on 8 employees was consequently carried out before this study. The respondents agreed that tier two banks strive to be competitive in the market and employees are encouraged to implement new ideas. The study concluded that absorptive capability has a significant contribution to performance of tier two banks. The study also recommended that banks should enhance customer retention to build their customer base.