Effects Of Innovation Strategies On Financial Performance: A Survey Of Insurance Firms In Eldoret

Abstract

Owing to the dynamic and challenging nature of doing business, globally companies have responded to the challenging and competitive environment. Due to this, companies have formulated strategies for their survival, this include different types of innovation. However, to be able to achieve this, the service delivery process need to be carefully defined, negotiated, and agreed upon considering involved parties' needs, wants and preferences. For an organization to become profitable it must put in place innovative strategies that position itself in market dominance and improve the firm’s overall performance. An innovation strategy has been recognized as a vital tool to confront the competitive pressure in the insurance market environment and also as a tool of improving the financial performance of these firms. The main objectives of this study was to find out the effects of innovation strategies on financial performance of insurance companies in Eldoret town; the specific objectives of the study were to; find out the effect of product innovation strategy on a firm’s sales performance, establish the effect of process innovation strategy on a firms sales performance, assess the effect of promotion innovation strategy on a firms sales performance and find out the effect of pricing innovation strategy on a firms financial performance The study was based on three theories; diffusion of innovation theory, technology acceptance model and balance scorecard. The study adopted an explanatory survey design with the target population being insurance firms in Eldoret town, Kenya. Target population was 21 insurance companies in Eldoret Town. A structured questionnaire was administered to the respondents. Data was coded and analyzed with aid of statistical package for social sciences (SPSS), the study employed regression analysis method to analyze and test the hypotheses. The study is expected to establish the innovation strategies adopted by insurance firms on financial performance The results indicated a significant relationship between the product innovation and the product performance (p = 0.001). There was no significant relationship (0.075) between the process innovations and the innovative performance measures. There was a significant relationship (p = 0.000) between the Promotion innovative measures and the market performance measures and that there was a significant relationship (p = 0.000) between the pricing innovative measures and financial performance measures. The study recommended that Insurance firms should undertake market research with an aim of improving their product innovation strategies. This will ensure that the Insurance firms only produce products that fulfill market needs and hence product innovations will have a positive impact on the innovative measures of a firm. Insurance firms should also seek to acquire more credit to assist them invest more heavily on process innovations which would ensure that the organization is able to effectively able to ensure that the products produced are value creating products. The Insurance firms should not invest heavily in the marketing of the products they produce. This will go a long way in ensuring that the firms are able to change the public’s perceptions about the products that they produce and hence they will be able to make more sales on the products that they produce. Finally, Insurance firms must invest in management as management has been identified o positively identify the financial performance measures. The management will assist in allocation of resources and coordination of activities to ensure that the firm is able to get the products to the market and make product sales on the products produced.