Internationalization and Performance of Commercial Banks in Kenya

Abstract

Many firms are increasing their foreign investment commitment to maximize their returns, as a result attention is growing on internationalization strategies and processes required to enter foreign markets without suffering crippling setback, as a result, firms adopt a gradual approach to internationalization, and may for a start do so by offloading excess domestic capacity into the international market. This study sought to investigate the effect on internationalization and performance of commercial banks in Kenya with a focus on the Upsalla Model and innovation theory in an attempt to find an answer to the research objective; understanding the relationship between internationalization and performance of commercial banks in Kenya. Commercial banking in Kenya has been fraught with ups and downs since the early 1896 when National Bank of India set up base in Mombasa. The objective of this study was to determine the effect of internationalization on the performance of commercial banks in Kenya. The study used a cross sectional survey and the target population were all commercial banks with operations in foreign markets. Data was collected using a questionnaire that was designed to capture the various variables under study. The questions were on a five point likert scale. The data collected was analysed using descriptive statistics including the mean, standard deviation and covariance of variation. Relationships were tested using correlation and linear regression analysis. The findings indicate that all the four variables significantly influence performance. Market knowledge was found to significantly influence performance. Market commitment was also found to significantly influence performance. The companies‘ current activities were found to be significantly influence performance of commercial banks. Commercial banks that intent to internationalize reportedly consider their current activities. Commitment decisions were reported to significantly influence performance. From the results it could also be concluded that commercial banks need to consider their current activities such as existing products, existing operational structures, and current strategic intentions if they are to register increased performance. Finally, it can also be concluded that commitment decisions need to be made with a lot more care and insightful consideration of the relevant variables.