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2025 

 

Effect of technology adoption on the 

sustainable competitive advantage of 

commercial banks in Kenya. 

 

 
Muriuki, Clement Miano 
Strathmore Business School  
Strathmore University 

 

 

 

 

Recommended Citation 

Muriuki, C. M. (2025). Effect of technology adoption on the sustainable competitive advantage of commercial 

banks in Kenya [Strathmore University]. http://hdl.handle.net/11071/15960 

 
 
 
 

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http://hdl.handle.net/11071/15960
http://hdl.handle.net/11071/15960


EFFECT OF TECHNOLOGY ADOPTION ON THE SUSTAINABLE COMPETITIVE 

ADVANTAGE OF COMMERCIAL BANKS IN KENYA 

 

 

 

 

 

 

CLEMENT MIANO MURIUKI 

REG NO. 12702 

 

 

 

 

 

 

 

 

A DISSERTATION SUBMITTED IN PARTIAL FULFILLMENT OF THE 

REQUIREMENTS FOR THE DEGREE OF MASTER OF BUSINESS 

ADMINISTRATION (MBA), STRATHMORE BUSINESS SCHOOL, STRATHMORE 

UNIVERSITY, NAIROBI, KENYA 

 

 

 

 

 

MAY,2025 



ii 

 

DECLARATION 

I, the undersigned, declare that this dissertation is my original and has not been submitted for 

examination in any other institution. 

Signature:      Date……20th May 2025…… 

Clement Miano Muriuki 

Reg No. 12702 

 

 

APPROVAL  

This research dissertation has been submitted for examination with my approval as the 

university supervisor. 

Signature:    Date……20th May 2025…… 

Dr. Albert Ochieng Abang'a  

Lecturer,  

Strathmore University Business School 

 

 

 

 

 

 

 

  



iii 

 

ABSTRACT 

The banking industry had been grappling with a dynamic landscape characterized by rapid 

technological advancements, regulatory changes, and evolving customer preferences. The 

proliferation of fintech innovations and advancements in digital technologies had been 

transforming the banking landscape, compelling banks to adapt and incorporate digital 

solutions to remain relevant and competitive. The objective of the study was to determine the 

effect of technology adoption capabilities on the sustainable competitive advantage of 

commercial banks in Kenya. The specific objectives were to investigate the impact of 

automation on sustainable competitive advantage of commercial banks in Kenya, to establish 

the impact of alternative channels on sustainable competitive advantage of commercial banks 

in Kenya, to determine the impact of optimization of Human Capital on sustainable competitive 

advantage of commercial banks in Kenya and to determine the impact of customer relationship 

management on sustainable competitive advantage of commercial banks in Kenya. The study 

was anchored on four theories: resource dependency theory, technology adoption theory, 

expectation disconfirmation theory, and Porter’s theory of competitive advantage. 

Furthermore, the study was framed within the pragmatist point of view, employing a 

descriptive research design to elucidate the correlation between the variables under 

investigation. The population under scrutiny encompassed the 39 commercial banks 

operational in Kenya as of December 2023. Data collection hinged upon a semi-structured 

questionnaire, which was administered to two respondents from each bank. The targeted 

participants consisted of managers within the Information and Communication Technology 

(ICT) and Business Development departments or individuals occupying analogous roles. The 

findings revealed that the automation of the bank processes enhances efficiency, reduces costs, 

and improves service delivery, while alternative banking channels such as mobile and internet 

banking increase accessibility and customer convenience. In relation to the role of adopting 

technology in the bank alternative channels, the findings reveal that it significantly enhances 

sustainable competitive advantage by increasing accessibility of the bank products, improves 

customer engagement, and facilitate personalized financial services. In relation to the 

technology adoption of the human capital function, the findings reveal that the bank operations 

are optimized because it improves the organization training and talent management, which in 

turn enhances productivity and innovation, fosters customer loyalty and brand reputation. 

Technology adoption in the CRM technologies was found to enhance the organizations data 

analytics capabilities, which in turn led to improved customer satisfaction, loyalty, and long-



iv 

 

term business growth. The study underscores the need for banks to integrate technology 

adoption with digital transformation and regulatory compliance to maximize competitiveness. 

In regard to the digitalization of customer It also highlights policy implications, emphasizing 

the role of regulators in fostering a supportive environment for financial innovation. By 

aligning with the resource-based view (RBV) theory, this research contributes to existing 

knowledge on technology-driven competitiveness in the banking sector, offering insights for 

scholars, industry practitioners, and policymakers. 

Key words: Sustainable competitive advantage; Alternative channels, automation, 

human capital  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



v 

 

TABLE OF CONTENTS  

DECLARATION...................................................................................................................... ii 

ABSTRACT ............................................................................................................................ iii 

LIST OF TABLES .................................................................................................................. ix 

LIST OF FIGURES ................................................................................................................. x 

ABBREVIATIONS AND ACRONYMS ............................................................................... xi 

DEFINITION OF TERMS.................................................................................................... xii 

CHAPTER ONE ...................................................................................................................... 1 

INTRODUCTION.................................................................................................................... 1 

1.1 Background to the Study ...................................................................................................... 1 

1.2 Statement of the Problem ..................................................................................................... 3 

1.3 Objectives of the Study ........................................................................................................ 5 

1.4 Specific Objectives .............................................................................................................. 5 

1.5 Research Questions .............................................................................................................. 5 

1.6 Significance of the Study ..................................................................................................... 6 

1.7 Chapter Summary ................................................................................................................ 7 

CHAPTER TWO ..................................................................................................................... 8 

LITERATURE REVIEW ....................................................................................................... 8 

2.1 Introduction .......................................................................................................................... 8 

2.2 Theoretical Review .............................................................................................................. 8 

2.2.1 Resource Dependency Theory ................................................................................... 8 

2.2.2 Technology Adoption Theory ................................................................................... 9 

2.2.3 Expectation Disconfirmation Theory ...................................................................... 10 

2.2.4 Potters Theory of Competitive Advantage .............................................................. 12 

2.3 Empirical literature review ................................................................................................ 13 

2.3.1 Automation and sustainable competitive advantage ............................................... 13 

2.3.2 Alternative channels and sustainable competitive advantage .................................. 15 



vi 

 

2.3.3 Optimization of human capital and sustainable competitive advantage .................. 17 

2.3.4 Customer Relationship Management and Sustainable Competitive Advantage ..... 19 

2.4 Conceptual Framework ...................................................................................................... 20 

2.4 Operationalization of Study Variable ................................................................................ 22 

2.5 Chapter Summary .............................................................................................................. 24 

CHAPTER THREE ............................................................................................................... 26 

RESEARCH METHODOLOGY ......................................................................................... 26 

3.1 Introduction ........................................................................................................................ 26 

3.2 Research Philosophy .......................................................................................................... 26 

3.2 Research Design................................................................................................................. 27 

3.3 Population of the Study ...................................................................................................... 27 

3.4 Data Collection .................................................................................................................. 27 

3.5 Data Analysis ..................................................................................................................... 28 

3.7 Research Quality ................................................................................................................ 29 

3.7.1 Validity .................................................................................................................... 29 

3.7.2 Reliability ................................................................................................................ 29 

3.7.3 Diagnostic Tests ...................................................................................................... 30 

3.7.4 Ethical Consideration .............................................................................................. 30 

3.8 Chapter Summary .............................................................................................................. 31 

CHAPTER FOUR .................................................................................................................. 32 

PRESENTATION OF RESULTS ........................................................................................ 32 

4.1 Introduction ........................................................................................................................ 32 

4.2 Response rate ..................................................................................................................... 32 

4.3 Demographic Information .................................................................................................. 32 

4.3.1 Bank’s Operational History ..................................................................................... 32 

4.3.2 Bank Size ................................................................................................................. 34 

4.3.3 Management Level .................................................................................................. 35 



vii 

 

4.3.4 Work Experience ..................................................................................................... 36 

4.4 Descriptive Statistic ........................................................................................................... 37 

4.4.1 Automation and Sustainable Competitive Advantage of Commercial Banks in Kenya

 .......................................................................................................................................... 37 

4.4.2 Alternative Channels and Sustainable Competitive Advantage of Commercial Banks 

in Kenya ............................................................................................................................ 39 

4.4.3 Optimization of Human Capital and Sustainable Competitive Advantage of 

Commercial Banks in Kenya ............................................................................................ 40 

4.4.4 Customer Relationship Management and Sustainable Competitive Advantage of 

Commercial Banks in Kenya ............................................................................................ 41 

4.4.5 Sustainable Competitive Advantage ........................................................................ 43 

4.5 Diagnostic Tests ................................................................................................................. 45 

4.5.1 Normality Test ......................................................................................................... 45 

4.5.2 Multicollinearity Test .............................................................................................. 46 

4.5.3 Homoscedasticity Test ............................................................................................. 46 

4.6 Correlation Analysis .......................................................................................................... 47 

4.7 Regression Analysis ........................................................................................................... 49 

4.7.1 Model Summary ...................................................................................................... 49 

4.7.2 Analysis of Variance (ANOVA) ............................................................................. 49 

4.7.3 Regression Coefficients ........................................................................................... 50 

4.8 Chapter Summary .............................................................................................................. 52 

CHAPTER FIVE ................................................................................................................... 53 

DISCUSSIONS, CONCLUSION AND RECOMMENDATIONS .................................... 53 

5.1 Introduction ........................................................................................................................ 53 

5.2 Summary of the Findings ................................................................................................... 53 

5.3 Discussion .......................................................................................................................... 54 

5.3.1 Effect of Automation on Sustainable Competitive Advantage ............................... 54 

5.3.2 Effect of Alternative Channels on Sustainable Competitive Advantage ................. 55 



viii 

 

5.3.3 Effect of Optimization of Human Capital on Sustainable Competitive Advantage 57 

5.3.4 Effect of Customer Relationship Management on Sustainable Competitive 

Advantage ......................................................................................................................... 58 

5.4 Conclusion ......................................................................................................................... 60 

5.5 Recommendations .............................................................................................................. 61 

5.5.1 Implications for Practice .......................................................................................... 61 

5.5.2 Contribution to Management ................................................................................... 61 

5.5.3 Implications for Policy ............................................................................................ 61 

5.5.4 Contribution to Knowledge ..................................................................................... 62 

5.6 Limitations of the Study..................................................................................................... 62 

5.7 Suggestions for Further Research ...................................................................................... 62 

REFERENCES ....................................................................................................................... 64 

APPENDICES ........................................................................................................................ 75 

Appendix I : Literature Map .................................................................................................... 75 

Appendix II: Cover Letter ................................................................................................ 86 

Appendix III: Questionnaire ............................................................................................. 87 

Appendix IV : List of Commercial Banks in Kenya ........................................................ 91 

 

 

 

 

 

 

 

  

 



ix 

 

LIST OF TABLES 

Table 2. 1: Summary of Research Gap .................................... Error! Bookmark not defined. 

Table 4.1: Response Rate ......................................................................................................... 32 

Table 4.2: Descriptive Statistics for Automation ..................................................................... 37 

Table 4.3: Descriptive Statistics for Alternative Channels ...................................................... 39 

Table 4.4: Descriptive Statistics for Optimization of Human Capital ..................................... 40 

Table 4.5: Descriptive Statistics for Customer Relationship Management ............................. 41 

Table 4.6: Descriptive Statistics for Sustainable Competitive Advantage .............................. 43 

Table 4.7: Normality Test ........................................................................................................ 45 

Table 4.8: Multicollinearity Test ............................................................................................. 46 

Table 4.9: Homoscedasticity Test (Breusch-Pagan Test) Results ........................................... 47 

Table 4.10: Model Summary ................................................................................................... 49 

Table 4.11: Analysis of Variance (ANOVA) .......................................................................... 49 

Table 4.12: Regression Coefficients ........................................................................................ 50 

 

 

 

 

 

 

 

 

 

 

 

 

 



x 

 

LIST OF FIGURES 

Figure 2. 1: Technology Acceptance Model ............................................................................ 10 

Figure 2. 2: Expectation-disconfirmation Theory (Adopted from Oliver, 1977) .................... 11 

Figure 2. 3: Conceptual Framework ........................................................................................ 21 

Figure 4.1: Bank’s Operational History ................................................................................... 33 

Figure 4.2: Bank Size ............................................................................................................... 34 

Figure 4.3: Management Level ................................................................................................ 35 

Figure 4.4: Work Experience ................................................................................................... 36 

 

 

 

 

 

 

 

 

 

 

 

 

 

  



xi 

 

ABBREVIATIONS AND ACRONYMS 

ATM  - Automatic Teller Machine 

CAK  - Communication Authority of Kenya 

CBK  - Central Bank of Kenya 

EDT  - Expectation-Disconfirmation Theory 

IT  - Information Technology 

NACOSTI - National Commission for Science, Technology, and Innovation  

NSE  - Nairobi Securities Exchange 

RDT  - Resource Dependence Theory 

SEM  - Structural Equation Modelling 

SME  - Small and Medium Enterprises 

TAM  - Technology Adoption Model 

 

 

 

 

 

 

 

 

 

 

 



xii 

 

DEFINITION OF TERMS 

 

Alternative Channels These are non-traditional avenues through which customers can 

access banking services and perform transactions. These 

alternative channels offer flexibility and convenience, allowing 

individuals to conduct their banking activities outside of 

traditional brick-and-mortar branches (Bendoly et al. 2015) 

Customer relationship Management 

 This refers to the strategic use of technology to manage and 

enhance relationships with customers by leveraging digital tools, 

data analytics, and automated processes to understand, 

communicate with, and provide personalized services to 

customers (Alqershi, 2020)  

Level of automation This refers to the extent to which technology and computer 

systems are used to perform various tasks and processes within 

the industry. It reflects the degree to which manual tasks are 

replaced or augmented by automated systems and technologies 

(Chen, et al., 2021). 

Optimization of human resources 

 This refers to maximizing the effectiveness and productivity of 

an organization workforce when implementing and integrating 

new technologies within the banking sector through alignment 

of human capabilities, skills, and roles with the requirements and 

opportunities presented by technological advancements (Hidaya, 

et al., 2020). 

Technology Adoption This refers to the process through which individuals or 

organizations embrace and incorporate a new technology into 

their daily practices, operational procedures, or ways of life. This 

notion is frequently linked with the diffusion of innovations. 

(Riddell & Song, 2017).  



xiii 

 

ACKNOWLEDGEMENT  

I wish to express my sincere gratitude to God Almighty, whose grace, strength, and protection 

have kept me alive and healthy throughout this academic journey. 

I am especially thankful to my supervisor, Dr. Albert Ochieng Abang’a, for his expert 

guidance, invaluable insights, and consistent support that greatly enriched the quality of this 

dissertation. I also extend my appreciation to Strathmore University for providing a rigorous 

and enriching learning environment that has shaped my academic and professional growth.  

My heartfelt thanks go to my dear wife, Abigael Miano, for her unwavering encouragement, 

patience when I worked late into the night, and belief in me. Her love and support have been 

my anchor throughout this program.  

Lastly, I am grateful to all the participants and respondents who generously shared their time 

and insights, making this research possible. 

 

 

 

 

 

 

 

 

 

 

 

 

 



xiv 

 

DEDICATION 

To my precious children — Harry Muriuki Miano, Harvey Maina Miano, Gianna Gathigia 

Miano, and Max Clement Githui Miano — may this be a reminder that with faith, 

determination, and hard work, all things are possible. 

To my dear mother, Charity Gathigia Muriuki — your sacrifices and prayers have laid the 

foundation upon which I stand.  

To the memory of my late father, Harry Muriuki Miano — your legacy of integrity, hard work 

and excellence continues to inspire me every day. 

This achievement is as much yours as it is mine. 

 

 

 

 

 



1 

 

CHAPTER ONE 

INTRODUCTION 

1.1 Background to Study 

In the recent past, the strategic management discipline has recognized technological change 

and innovation as an important catalyst to an organization productivity and sustainable growth 

(Johnson, et al. 2017). In the last decade, businesses have witnessed notable progressions in 

communication, information, and connectivity technologies. These advancements encompass 

digital convergence, Web 2.0, service-oriented architectures and cloud computing. These 

technologies have effectively eliminated barriers of time and distance, leading to a 

transformation in the business environment. Technology adoption is an important form of 

strategic innovation that is different from the existing business and that if appropriate 

technology is employed by a firm, and then it has the potential to significantly its competitive 

advantage (Riddell & Song, 2017). The source of competitiveness from the adoption of 

appropriate technology in a business include bringing down operational costs and contributes 

to an increase of output by 6 to 81% (Arifin & Fontana, 2015), improves efficiency and 

effectiveness by making the organization more flexible and accountable. The sustainable 

competitive advantage that emanates from technology adoption depends on the extent of level 

of automation, application in alternative channels, capacity to optimize human capital and also 

help in making informed decision.  

Different commercial banks, both at global and local level have embraced various forms of 

technology in their operations with such global commercial banks as Goldman Sachs and 

UniCredit accelerating digital transformation through AI and blockchain (Business Insider, 

2024). Goldman Sachs has deployed AI tools to 10,000 employees, aiming for full integration 

by year-end while UniCredit has partnered with Google Cloud to enhance digital services 

across 13 markets. Over 90% of banks are expected to offer real-time payments by 2025 and 

through a partnership with fintech firms, banks have been able to expand their digital lending 

services. Through the adoption of advanced cybersecurity systems, such as biometric 

authentication and real-time fraud detection, banks are able to enhance consumer trust and 

regulatory compliance (African Business, 2024).  

 



2 

 

In a fiercely competitive business environment, it's vital for a company to possess the requisite 

resources and capabilities to effectively leverage its distinctive organizational structure, 

enabling it to surpass rivals in the industry. According to Porter (1985), the enduring success 

of a business hinges on its capacity to sustain competitiveness through the adoption of a distinct 

value-creation strategy not concurrently pursued by competitors. Organizations must formulate 

strategies aimed at enhancing performance relative to both current and future industry rivals. 

This involves strategically harnessing various controllable resources recognized by the 

company as potential sources of competitive advantage. Schweizer and Koscher (2021) 

propose that an organization's competitive edge stems from resources and competencies that 

drive the production of goods or services. Kharub, et al. (2018) argue that a firm's competitive 

advantage stems from its capacity to do activities in a manner that cannot be replicated by 

others using their own internal resources.  Porter (1980) asserts that competitive advantage may 

be attained by either pursuing cost leadership or differentiation.  

Competitive advantage stems from either physical or intangible resources inside a firm. 

Tangible assets consist of technical, financial, and physical resources, while intangible assets 

include human capital, innovation, creativity, and the organization's reputation. Porter (1980) 

identifies three primary elements of competitive advantage for an organization: cost leadership, 

difference, and focus. Cost leadership is achieved by implementing a plan that maximizes 

efficiency and minimizes costs, surpassing rivals. An organization may achieve cost efficiency 

by implementing efficient scale development of facilities, reducing needless overhead budget, 

and minimizing expenses in each firm operation. The differentiation approach focuses on 

creating distinct items in comparison to other competitive products (Cho & Lee, 2018).   Some 

of the indicators of differentiation in an organization include adoption of a different technology, 

prestige and brand, innovation and different product features.  Further the ability of an 

organization to develop a different supply network and customer service are additional features 

of differentiation.  Finally, the focus strategy is concerned with selecting a certain business 

segment and product to be its focus.  The common indicators of the focus strategy include a 

focusing on superior products for a certain segment, excellent products and offering excellent 

service on the market being served.  In the present study, the banks sustainable competitive 

advantage measures will include, cost containment, turnaround time, customer satisfaction, 

customer number growth, customer value growth and product innovation. One of the Kenyan 

market segments that have experienced adoption of technology in its quest to improve their 

competitiveness is banking industry.  



3 

 

 Commercial banks in Kenya play a vital role in driving economic development by making 

substantial contributions to the country's financial stability, growth, and general prosperity. The 

Central Bank of Kenya (CBK) (2023) reports that there are now 39 commercial banks in 

operation in Kenya, with eight of them being listed on the Nairobi Securities Exchange (NSE).  

The banks act as intermediaries between savers and borrowers and thus mobilize funds from 

individuals and businesses with surplus funds and channel them to those in need of capital for 

various purposes. In addition, commercial banks offer credit facility to businesses, mobilize 

deposits, offer trade and commerce support, monetary policy transmission, facilitate financial 

inclusion as well as general stability of the financial system. CBK (2019) reports that several 

banks have undertaken diverse improvements in their operations during the last decade. 

Simultaneously, the local banking industry had eight distinct mergers and acquisitions 

throughout the same timeframe. These transactions, together with diverse product 

diversifications, led to a range of performance outcomes. In the past ten years, the banking 

sector has experienced several changes. These include the consolidation of smaller financial 

institutions by larger banks through mergers and acquisitions, the integration of new 

technologies, especially mobile technology, to enhance the efficiency of banking services, the 

implementation of new organizational frameworks, and the ongoing assessment of cultural 

aspects within the industry (Muhindi & Ngaba, 2018).   

The primary banking sectors that have embraced the implementation of information technology 

include core banking services, ATM systems, point of sale systems, mobile banking, and 

internet banking. In addition, technology has been integrated into the cheque clearing system 

and the process of agency banking rollover. In a similar vein, the regulation of the banking 

industry has grown, necessitating ongoing adjustments by banks to conform to the prevailing 

banking framework (siligwa & Rennox, 2017).  As a result of the uncertain nature of the 

banking industry in Kenya and the competitiveness being witnessed, it becomes imperative 

that the banks be managed by persons that have a strategic vision and can anticipate changes 

and be able to come up with appropriate strategies.  

1.2 Statement of the Problem 

Over the preceding two decade, the banking sector has found itself contending with a 

multifaceted landscape characterized by swift technological progressions, regulatory change, 

and the evolving tendencies of clientele (Ooko & Muchelule, 2024). This paradigm shift has 

been underpinned by the proliferation of financial technology (fintech) innovations and the 



4 

 

advent of digital technologies, ushering in transformative changes within the Kenyan banking 

sphere (Kamuangu, 2024). To remain competitive, banks have undertaken strategic 

investments in user-centric mobile applications, online banking platforms, and other digital 

solutions aimed at augmenting customer experiences and securing a competitive advantage. A 

failure to adapt to these transformative dynamics could precipitate deleterious ramifications on 

the sustainability and competitive positioning of financial institutions (Schweizer & Koscher, 

2021). The thoughtful adoption of pertinent technological advancements by Kenyan 

commercial banks is anticipated to exert an apparent impact on their competitive environment. 

Nonetheless, the precise magnitude and trajectory of the resultant organizational outcomes 

stemming from varied digital adoption capacities remain nebulous. By embracing digital 

banking solutions, mobile banking platforms, sophisticated data analytics, and technological 

integration, Kenyan banks can bolster their capacity to diversify their alternative channels, 

optimize human capital utilization, proactively manage customer relations, and ultimately, 

fortify their competitive position. Ndungu (2018) underscores that banks that efficaciously 

incorporate technology into their operational frameworks, products, and service provisions are 

better positioned to address evolving customer demands, navigate market fluctuations, and 

negotiate the competitive background. 

Multiple scholarly inquiries have sought to delineate the influence of technology adoption on 

banking outcomes. For instance, Mang’ana (2022) examined the strategic integration of 

technological innovations and its impact on the competitive advantage of commercial banks in 

Kenya. Specifically, the study endeavoured to discern how the adoption of technology-driven 

capabilities, encompassing E-Money transfer systems, telephone banking facilities, internet 

banking platforms, and internal control mechanisms, influenced the competitive positioning of 

banks. The findings suggest a positive and statistically significant relationship between 

technology adoption metrics and the competitive advantage of commercial banks in the Kenyan 

context. Ahmed and Wamugo (2018) delved into the ramifications of financial innovation on 

the performance trajectories of commercial banks in Kenya, while Haseeb et al. (2019) 

endeavoured to ascertain the role of technological challenges in engendering a sustainable 

competitive edge for Small and Medium Enterprises (SMEs) in Malaysia. Although the latter 

investigation alluded to an indirect effect via strategic alignment on sustainable competitive 

advantage, it did not explicitly consider the competitive advantage accruing to banks from 

facets such as automation, alternative service channels, human capital optimization, and 



5 

 

customer relationship management. In addition, the context of the two studies differs due to 

their operating environments and regulatory conditions.  

The speed at which disparate digital technologies are being introduced into the financial 

ecosystem, and their consequential impact on institutional operations, is inherently dynamic. 

What might have constituted a source of sustainable competitive advantage a few years ago is 

not necessarily tenable in the contemporary milieu or foreseeable future. Moreover, antecedent 

scholarly examinations scrutinizing the nexus between digital technology adoption and 

organizational outcomes have often relied upon disparate constructs or amalgamations thereof, 

diverging from the four-dimensional framework of digital adoption contemplated within the 

purview of the present inquiry. Compounded by contextual disparities across these studies, the 

current investigation sought to bridge extant conceptual, contextual, and methodological 

lacunae. 

1.3 Objectives of the Study 

The general objective of the study was to assess the effect of technology adoption capabilities 

on the sustainable competitive advantage of commercial banks in Kenya  

1.4 Specific Objectives 

i. To investigate the effect of automation on the sustainable competitive advantage of 

commercial banks in Kenya 

ii. To establish the effect of alternative channels on the sustainable competitive advantage 

of commercial banks in Kenya 

iii. To determine the effect of optimization of Human Capital on the sustainable 

competitive advantage of commercial banks in Kenya 

iv. To determine the effect of customer relationship management on the sustainable 

competitive advantage of commercial banks in Kenya  

1.5 Research Questions 

i. What is the effect of level of automation on the sustainable competitive advantage of 

commercial banks in Kenya? 

ii. What is the relationship between levels of alternative channels on the sustainable 

competitive advantage of commercial banks in Kenya?  

iii. How does optimization of human capital affect the sustainable competitive advantage 

of commercial banks in Kenya? 



6 

 

iv. How does customer relationship management impact on the sustainable competitive 

advantage of commercial banks in Kenya?  

1.6 Significance of the Study 

This study will be of importance to commercial banks in Kenya, regulators, academicians as 

well as be of value to the development of the strategic practice.  

1.6.1 Policy holders  

The study will be of value to the policyholders who will understand the significance and 

direction of effect of technology adoption. Policyholders like the CBK can benefit in refining 

and developing regulations. This research can inform regulatory frameworks that encourage 

responsible and secure technology adoption, ensuring that banks comply with industry 

standards and protect the interests of policyholders. Understanding how technology adoption 

influences the competitive advantage of banks helps regulators create an environment that 

encourages healthy competition. This can lead to better services, improved products, and 

ultimately benefit policyholders by providing them with a wider array of choice. In addition, 

the research findings can inform regulatory policies focused on protecting consumers, 

including policyholders. This is because that by understanding how technology adoption 

affects service delivery, data security, and overall customer experience, regulators can 

implement measures to ensure that policyholders are treated fairly and their interests are 

safeguarded. 

1.6.2 To the Management  

The study results may provide valuable insights to the management of commercial banks, 

aiding them in making strategic choices. The insights may be used by bank management to 

make well-informed strategic choices on technology investments, ensuring that their resources 

are aligned with the objective of attaining and maintaining a competitive advantage in the 

market. Likewise, the bank administration may effectively deploy the resources that are now 

accessible.  To be competitive in a quickly changing technology environment, the bank would 

need to make investments in technical infrastructure, acquire talented individuals, and 

implement ongoing training programs. Typically, adopting technology improves how 

efficiently a bank operates. As a result, bank management can use research findings to pinpoint 



7 

 

areas where technology can be used to make processes more efficient, cut costs, and improve 

overall efficiency. This ultimately helps the bank gain a long-lasting competitive advantage. 

1.6.3 To scholars 

The project will enhance the scholarly understanding of the convergence of technology 

adoption, sustainable competitive advantage, and the banking sector in the Kenyan 

environment. This research will contribute to the existing information on the influence of 

technology improvements on corporate strategy and competitiveness. Scholars may use the 

study results to enhance or create theoretical frameworks pertaining to the adoption of 

technology and the establishment of a sustainable competitive advantage in the banking 

industry. The acquired insights may result in the development of novel theoretical frameworks 

or the improvement of current ones. Furthermore, the study will provide valuable insights that 

may guide future research agendas by establishing a foundation for proposing and conducting 

further studies in relevant domains. This will contribute to the advancement of the subject and 

the resolution of existing knowledge gaps regarding the use of technology in the banking sector. 

Moreover, this study will enable scholars to provide counsel to policymakers and regulatory 

entities. By disseminating evidence-based perspectives, academics may shape the formulation 

of policies that promote responsible and efficient integration of technology in the banking 

industry. 

1.7 Chapter Summary 

The first chapter lays the groundwork for the entirety of the research paper. It delves into the 

background of the study, elucidating the variables that inform it, while also providing context 

to the issue by highlighting its significance within the landscape of commercial banks in Kenya. 

Furthermore, it expounds upon the rationale, scope, and significance of the study to various 

pertinent stakeholders, thereby establishing a comprehensive framework for the research.   

 



8 

 

CHAPTER TWO 

LITERATURE REVIEW 

2.1 Introduction 

This chapter presents a comprehensive overview of previous research undertaken by scholars 

about technology adoption and its impact on gaining a competitive advantage. These studies 

provide more understanding of the relevant literature and theoretical underpinnings that form 

the basis of this investigation. This section covers the theoretical basis, extensive empirical 

research on the adoption of technology, and its impact on achieving a sustainable competitive 

advantage. Finally, the chapter concludes by presenting a conceptual framework and providing 

a concise overview of the existing literature, while also highlighting areas where more study is 

needed.  

2.2 Theoretical Review 

To research was anchored on four theories, namely, Resource dependency theory, Technology 

Adoption Theory, Expectation Disconfirmation Theory and Porters theory of competitive 

advantage. Discussion of these theories and their relevance in the current study is discussed in 

this section. 

2.2.1 Resource Dependency Theory 

The Resource Dependence Theory (RDT) traces its roots back to the pioneering work of Pfeffer 

and Salancik (1978). This theoretical framework asserts that organizations are not self-

contained entities; rather, they rely on their external environment to procure the essential 

resources required for their operations. Davis and Cobb (2015) further emphasize that RDT 

suggests organizations lack sufficient strategic resources, compelling them to seek external 

sources to fulfil their resource needs. Effectively managing this dependence is crucial for 

organizations, and they can achieve this by strategically structuring their relationships with 

other entities through formal and semi-formal mechanisms. This approach ensures a consistent 

and reliable supply of the required resources. Moreover, the theory posits that businesses' 

decision makers form partnerships with other entities to develop their company and get access 

to new resources, driven by the potential danger posed by existing and future competitors 

(Klein & Pereira, 2016). The idea acknowledges that in order to have a successful collaborative 

approach among partners; it is necessary to identify and respect the responsibilities and values 

of each organization involved.  



9 

 

Thiong'o et al. (2021) cited a previous study by Husted and Kock (2015) that recognizes the 

view of Resource Dependence Theory (RDT) that relying on external resources leads to the 

creation of a relational rent. This rent, in turn, facilitates the pooling of resources, technologies, 

markets, and information, resulting in benefits from economies of scale and scope. It also 

enables firms to share risks and outsource various stages of the value chain. According to 

Chimucheka and Mandipaka (2015), resource dependence has strategic implications for 

business organizations. It enables firms to focus on their core activities in the value chain, 

enhances their network flexibility by avoiding unnecessary commitments, and reduces 

transaction costs through mutual awareness and trust among network members. In addition, 

Frynas and Yamahaki (2016) assert that the use of RDT collaboration tactics enables 

enterprises to effectively acquire essential resources from their surrounding environment. In 

summary, the Resource Dependence Theory (RDT) suggests that an organisation must use 

external resources' advantages in addition to its own internal resources to increase its 

competitiveness.  

The resource dependency hypothesis recognizes the importance of collaboration, as it leads to 

enhanced achievement of individual goals and the emergence of fresh prospects. Moreover, the 

unequal reliance on resources contributes to the mitigation of environmental unpredictability 

for specific companies. As cooperating partners persist in their joint efforts, they develop a 

mutual dependency that strengthens the current economic connection. Hence, when an 

organization encounters a performance obstacle, assistance from external collaborators aids in 

readjusting the company's strategic trajectory. Therefore, proponents of Resource Dependence 

Theory (RDT) argue that it is crucial for a corporation to carefully consider the individuals and 

entities that have control over essential resources.  

2.2.2 Technology Adoption Theory 

The Technology Adoption Model (TAM) was proposed by Davis (1989) as a tool for 

forecasting consumers' acceptance and application of new technology.  According to 

Venkatesh (2000), the concept posits that the adoption of a new technology by users or an 

organization is determined by their assessment of its ease of use, perceived utility, and attitude 

toward its usage. According to their own evaluation, the actions might have either positive or 

negative effects on a system. Users anticipate real advantages from the usage of the technology 

while completing their duties. This stance elucidates the critique aimed at the Technology 

Acceptance Model (TAM), asserting that although TAM effectively describes individual 



10 

 

behavior, it falls short in elucidating user behaviors related to the acceptance or rejection of 

new technologies (Hu et al., 2019). 

As per Davis (1989), consumers' inclination to embrace a new technology is mostly determined 

by their perception of its utility in doing their tasks, rather than its level of difficulty. However, 

the model still identifies the simplicity of use as having an essential influence on the adoption 

of the new technology as it would ultimately decide the perceived utility. Consequently, the 

more user-friendly a particular technology is, the higher the probability that consumers would 

see it as valuable (Fraj, Matute & Melero, 2015). Figure 2.1 illustrates the chronological order 

in which an organization or person adopts technology. 

 

Figure 2. 1: Technology Acceptance Model 

Source: Bagozzi et Warshaw 

According to Figure 2.1, the TAM model acknowledges that the utility of technology and its 

simplicity of use may forecast one's attitude and desire to use it, which in turn leads to the 

acceptance and utilization of that technology. In the context of a business organization, 

perceived usefulness pertains to an individual's perception of the extent to which using a 

specific technology would enhance the competitiveness of the firm. Conversely, perceived ease 

of use refers to the extent to which an individual believes that using the technology would 

require minimal effort (Davis, 1989). It is important to note that the Technology Acceptance 

Model (TAM) does not consider the user's subjective viewpoint on the technology. Instead, 

TAM concentrates on the user's subjective assessment of the technology's perceived usefulness 

and ease of use as benchmarks for acceptance.  

2.2.3 Expectation Disconfirmation Theory 

The Expectation-Disconfirmation Theory (EDT) was advanced by Oliver (1977) and further 

refined in 1980) with the intention of explaining why users of a technology change their 

reaction over time of implementing the project. The underlying focus of EDT is that the 



11 

 

satisfaction of a technology by users is a function of their expected expectation and 

disconfirmation and the same will influence their repurchase intention (Oliver et al. 2014). The 

expectation of a user is taken as a prior position that they hold on to the product before acquiring 

them. On the other hand, disconfirmation describes any discrepancy that might come about 

between the expectations and actual experiences of the used (Susarla et al. 2018).  Positive 

disconfirmation occurs when an event proves to be better than anticipated, according to Kopalle 

and Lehmann (2001). Conversely, if the result falls short of expectations, there is a negative 

disconfirmation. 

Oliver (1980) proposed a model that predicts customer satisfaction with technology based on 

a five-step process. This process begins with the user's original expectations before purchasing 

or adopting the system, followed by the acceptance of the product or service. Following the 

adoption of the product, the next phase involves the user forming a perspective of the product 

based on its main qualities (Chiu et al., 2005). The third phase in the confirmation 

disconfirmation process involves comparing the assessment of the product with the original 

perspective, depending on the degree of disconfirmation. Confirmation and positive 

disconfirmation help sustain a reasonable degree of contentment, whereas negative 

disconfirmation reduces dissatisfaction (Oliver, 2009). Figure 2.2 illustrates this approach.  

 

 

 

 

 

 

 

 

Figure 2. 2: Expectation-disconfirmation Theory (Adopted from Oliver, 1977) 

 

In the information technology field, the effect of unrealistic expectation by users on a 

technology was assessed by Ginzberg (1981) and found that organizations and individuals that 

held a more realistic position on a system were found to be more satisfied than those that held 

high expectations about a technology adopted. Szajna and Scamell (1993) subsequently 

elucidated this discovery by using the cognitive dissonance theory to demonstrate that users 

Expectation 

Perceived 

Performanc

e  

Confirmation   Satisfaction  Repurchase 

Intention  



12 

 

would adjust their level of satisfaction with a system to match with their expectations. Contend 

that having too lofty expectations would lead to a diminished perception of the benefits, in 

contrast to having reasonable expectations. The degree of contentment elucidates the 

fundamental inclination to persist and how these incentives impact the inclination to persist. 

Building on earlier studies, Bhattacherjee and Premkumar (2004) explained the processes and 

justifications for how users' attitudes and views about using IT change as they get more 

expertise with the particular system. The findings show that the most important element 

influencing the likelihood of continuing to use information systems is one's degree of pleasure 

with their use.  

2.2.4 Potters Theory of Competitive Advantage 

Porter (1985) is credited with formulating the theory of competitive advantage, which asserts 

that an organization can attain a competitive edge by either offering the same benefits as its 

competitors at a lower cost (cost advantage) or by delivering a product with superior benefits 

compared to competing products (differentiation advantage). The theories of competitive 

advantage advocate for corporate organizations, much like countries, to adopt strategies that 

lead to the production of superior commodities capable of being sold at premium prices in the 

market (Wang, Lin & Chu, 2019). The theory posits that for a business to achieve satisfied 

customers; it is necessary to provide products of greater value than what is expected by 

management. This can be accomplished through efficient production organization, increased 

utilization, and minimizing production costs (Nderituet al., 2020). Resources that are precious 

and scarce might provide an edge over competitors. They can sustain their advantage over time 

if these resources are likewise difficult to duplicate, replace, and disperse (Barney, 2010). 

When a business acquires or develops a quality, or set of qualities, that enables it to perform 

better than its rivals, it has a competitive advantage. These characteristics might include having 

easy access to natural resources, such large quantities of excellent ores or affordable power 

sources, having a highly educated and competent labour force, and having cutting-edge 

technology. 

Additionally, as per Porter's analysis, once the factors influencing a business's competitive 

position are discerned, the framework delineates strategies aimed at elevating the organization's 

performance. These strategies encompass focus, distinctiveness, and cost leadership. Cost 

leadership, specifically, is a strategic tactic geared towards surpassing competitors by 

prioritizing efficiency over the quality of the service or product (Al Shobaki & Abu-Naser, 



13 

 

2017). This approach revolves around delivering services or products to clients at a 

competitively lower cost while upholding service standards and quality. This strategy is shown 

by the management process of reducing costs and expenses inside a company or organization. 

A firm's distinguished approach refers to the deliberate action taken to establish a noticeable 

and tangible distinction in their product or service. The goal is to attract a broad client base 

within the industry who recognize and appreciate the high quality and alignment with their 

unique requirements (Porter, 1998). The focus strategy entails a corporation narrowing down 

its marketing approach by targeting certain geographic regions, segments of the product line, 

or customer groups. Indeed, this approach enables organizations to focus their efforts on 

specific geographic regions, product line segments, or customer groups (Brenes et al., 2014). 

By directing resources and strategies towards areas or market niches, companies employing a 

focused approach can tailor their offerings more precisely to meet the unique needs and 

preferences of those specific segments, potentially gaining a competitive advantage in those 

targeted markets. Absolutely, this strategic focus empowers organizations to streamline their 

operations and allocate resources efficiently, thereby maximizing effectiveness within their 

chosen domains.  

2.3 Empirical literature review 

2.3.1 Automation and sustainable competitive advantage 

The integration of cutting-edge technologies for business process automation enables 

organizations to enhance the digitization of internal operations and processes. This, in turn, 

leads to heightened efficiency and effectiveness, ultimately securing the sustainability of the 

business (Laudon and Laudon, 2019; Ivanov & Mayorova, 2015). The utilization of various IT 

platforms is associated with a multitude of advantages that contribute to an overall 

improvement in corporate competitiveness. Big data analytics, for instance, facilitates the 

extraction of value from vast amounts of data, allowing for swift collection, discovery, and 

analysis (Chen, et al., 2014). Online social network data, being a conventional and significant 

source of big data, can be analyzed to drive innovative and customer-centric post-sale services, 

as well as to enable prompt actions based on consumer feedback. As per the principles of 

dynamic capabilities, business organizations integrate, build, and reconfigure technological 

resources to adapt to changing environments. Through adoption of an appropriate technology 

adoption enables learning, innovation, and strategic renewal, thereby sustaining competitive 



14 

 

advantage in dynamic financial markets through continuous responsiveness and capability 

enhancement (Dewasiri, et al. 2023). 

In a study conducted by Chen et al. (2021), they explored how the adoption of fintech skills 

could enhance the performance and future survival of commercial banks in China. This 

highlights the growing recognition of the role of technology in reshaping and optimizing 

business practices within the financial sector. The research used a qualitative methodology to 

gather data, using five questionnaires and analysing the data using the technique of structural 

equation modelling. Consistent with the research conducted by Laudon and Laudon (2019), it 

is evident that the adoption of fintech products by Chinese commercial banks had a favourable 

impact on employee productivity, customer contentment, and the overall quality of banking 

services. Consequently, this led to an enhancement in the competitiveness of these banks. In 

contrast to Bendoly et al.'s (2015) findings, which indicated that customers did not encounter 

challenges when using alternative banking channels, Chen, et al. (2021) study revealed a 

noteworthy adverse effect of users experiencing difficulties with FinTech products (FTP). This 

difficulty ultimately led to a decrease in customer satisfaction.  

Beck et al. (2017) emphasize the use of cloud computing in business to enhance the efficient 

use of resources, enabling the implementation of economies of scale and cost management in 

financial institutions. In addition to cost reductions, cloud computing was also discovered to 

enable effortless deployment and streamlining of corporate processes.  In their 2022 study, 

Boute et al., examine the implementation of digital lean operations in Belgian financial 

institutions. They argue that automating business operations facilitates collaboration and data 

sharing within business networks, enabling the identification of market shifts and the 

implementation of strategic actions such as relocating facilities, changing suppliers, and 

outsourcing non-core services.  The research determined that the use of artificial intelligence 

improves the integration of digital lean operation inside financial institutions. According to 

Ngai et al. (2011), the automation of business processes enhances the flexibility of supply 

chains by enabling them to promptly detect and react to market fluctuations, exchange 

information and knowledge across different functions, adapt to unexpected events and market 

changes, and establish a virtual supply chain. This reduces the reliance on internal resources 

necessary for providing effective services. This statement outlines the fundamental concept of 

the Resource Dependence Theory (RDT), which suggests that to increase an organization's 

reach in terms of products and services, it is necessary to seek more external resources to 

supplement the existing internal resources.  



15 

 

Akpan et al. (2020) argue that the automation of enterprises provides firms with the chance to 

generate value by creating novel goods for clients. Optimal results are attained when the 

business entity efficiently collects consumer data during their association with the company, 

while also enhancing focused marketing strategies via product differentiation and market 

segmentation. Kemunto and Kagiri (2018) aimed to assess the influence of applying fintech 

methods on the competitiveness of Kenya commercial bank via the use of a descriptive study 

approach. The researcher considered the factors of online banking, mobile banking, process 

automation, and agency banking. The discovery demonstrates a clear and meaningful 

connection between process automation and competitiveness in commercial banks. This study 

corroborates the results of Mwangi (2013), which shown that automating operations improved 

customer service, decreased cost inefficiencies, facilitated bank development, and helped 

maintain a competitive edge in commercial banks. Nevertheless, the use of automation in a 

firm does not inherently provide a competitive advantage. Instead, this advantage is only 

achieved when combined with effective organizational strategies and utilization of human 

resources (Coltman & Devinney, 2013).  In addition, organizations will be required to adopt a 

higher quantity and frequency of modifications in the IT system to sustain its support for a 

business process post-implementation. Likewise, firms may need to expand their IT systems 

by including new modules or using new methods of executing procedures to achieve 

commercial growth (Gyimah et al., 2023) 

2.3.2 Alternative channels and sustainable competitive advantage 

The use of alternative channels is the process through which a business uses physical stores as 

well as online platforms to sell its products or offer services. Bendoly et al. (2015) underscore 

that there are two approaches to integrating business channels: a hybrid model amalgamating 

online and offline businesses, and a strategy facilitating access to and information about 

physical stores on the internet platform. Wang and Cheng (2016) observe that retail giants like 

Walmart, Macy's, Best Buy, and Staples have acknowledged the significance of online business 

channels and are adopting a multi-channel retailing strategy. Implementing a multi-channel 

company strategy offers the advantage of enhancing service quality and mitigating risk 

exposure by effectively integrating online and offline channels, leveraging their respective 

strengths. For instance, the physical channel may complement the internet channel in terms of 

service quality and risk management. 



16 

 

In a study by Oteh, et al. (2017), the impact of e-banking channels on the operational 

effectiveness of commercial banks in Nigeria was evaluated. Conducted with a sample of 47 

banks in Ibo state, the study employed a descriptive research approach for data collection and 

analysis. The findings indicated that the effectiveness of electronic banking channels, such as 

debit cards, video banking, and mobile transfers, was influenced by the source of technology. 

This aligns with the findings highlighted by Kaur et al. (2021), emphasizing the diverse 

channels utilized by banks. Consequently, the enhanced service quality and reduced risk 

associated with the online channel may contribute to a more favourable evaluation of the offline 

channel. Online channels offer enhanced intermediation by enabling commercial organizations 

to extend the distribution of specialized items across a wide geographical area, broadening their 

supply with specialty products from other small and medium-sized enterprises (SMEs). 

Nonetheless, it's crucial for individuals utilizing digital technology across various platforms 

provided by a firm to recognize the advantages and user-friendliness of the technology. The 

Technology Acceptability Model (TAM) suggests that the adoption and acceptability of a 

technology are influenced by its perceived utility and ease of use. 

According to Jeanpert and Paché (2016), an alternative channel strategy in the banking industry 

yields various benefits, both from the bank's perspective and from the customer's point of view. 

Consequently, one of the challenges banks faces is ensuring consistent service delivery quality 

across both e-banking and traditional brick-and-mortar branches. It is incumbent upon the bank 

to provide the same level of service across all distribution channels consistently. Patel and 

Brown (2016) acknowledges that adoption of alternative channel of service delivery by a bank 

result in less administration work in form of reduced stationery, paper costs and that customers 

can be able to utilize these channels without intervention of the bank staff. However, this leads 

to less personal interaction with bank staff and thus no consultation option about their finances. 

Bendoly et al. (2015) contend that the implementation of online service delivery presents 

obstacles in the early stages due to the perceived complexity and difficulty experienced by 

clients. It will need a period for clients to get acquainted with the new system.  

From the customers’ point of view, online service delivery is associated with improved 

effectiveness because banks end up deploying advanced technology devices, management 

programs or alarms to help their customers administer all its assets efficiently. Moreover, the 

use of multi-channel services leads to enhanced competitive advantage since these channels 

are always accessible, operating continuously throughout the week (Johansson & Kask, 2017). 

Hence, it is advantageous since there is no time to waste standing in a line, as the bank is now 



17 

 

easily accessible with only a click. Similarly, the services are found everywhere since 

customers can access bank services everywhere, whether in town or out of town. The 

convenience to customers is equally enhanced due to their ability to manage all their accounts 

and transactions with a click of a button in dispersed geographical locations.  

2.3.3 Optimization of human capital and sustainable competitive advantage 

The long-term viability of enterprises relies on efficiently managing the available resources, 

with internal resources playing a crucial role in enhancing the competitiveness of organizations 

(Hidaya, et al. 2020). Human capital, despite its intangibility, is a crucial internal resource that 

plays a vital role in knowledge management at the firm level.  The sustainable competitive 

advantage of a business depends on its ability to establish relationships with external networks, 

both at the micro level (such as customers, competitors, suppliers, and partners) and at the 

macro level (including the technological, legislative, demographic, and cultural environments). 

Therefore, to achieve long-term success, it is crucial for the organization's human capital to 

effectively manage and reconcile the interests of many stakeholders (Prajogo & Oke, 2016). 

Magana (2022) performed research investigating the impact of technology developments on 

the competitive advantage of commercial banks in Kenya. The study used a descriptive 

research approach, with a sample size of 215 respondents from 43 branches of various 

commercial banks located in the Nairobi Central Business District (CBD). The collection of 

primary data included the use of a semi-structured questionnaire. The questionnaire assessed 

the level of technical innovation using indicators such as money transfer equipment, telephone 

banking, internal workers' network, and internet banking technology. The research findings 

suggest that organization internal controls were enhanced by effective networks of staff with 

intense knowledge and that when employees are connected to one another via internal 

communication network, it increases positive relationship with customers resulting from 

prompt network. The findings support the conclusion that effective customer-centric 

communication leads to improved customer experience, loyalty and eventually organizational 

performance (Al-Shbiel & Al-Olimat, 2019). The findings imply that the adoption of internal 

communication technology improves the overall efficiency, accessibility of convenience of 

financial service, an outcome that differentiates bank services from one another and thus 

resulting in competitive advantage.  

The influence of human resource management innovation on the relationship between learning 

capabilities and competitive advantage of service firms in Australia was undertaken by 



18 

 

Amarakoon, et al. (2018). The research employed a qualitative case study research design with 

an interview guide being the research tool. Further the study collected the firm’s secondary 

data relating to the number of employees, business operations, and management team 

concerned. The targeted respondents were HR managers of the respective team with over 28 

interviewees participating in the study. The findings suggest that both internally generated and 

externally acquired knowledge from the technologically enabled systems resulted in improved 

speed, cost management and agility of the service firms to the changing business environment. 

The study findings also indicate that for the requisite competitive advantage to be achieved, 

then it is important that the external knowledge is appropriately adapted to avoid inefficiencies, 

loss of credibility and wastages. This finding is in tandem with, De Luca and Atuahene-Gima 

(2007) which found that a lack of synergy between internally and externally sourced 

technology sources affected seamless working of staff in organizations.  

According to Raffiee and Coff (2016) for an organization human capital to have desired effect 

on the sustainability potential of the firm, employees need to have necessary competence, 

creativity, knowledge and social capital. The degree of expertise and experience that 

individuals have gained from both their present and past occupations is referred to as their 

competence. The essential skills that workers should possess are implementation, coordination, 

assistance, inquiry, renewal, assessment, concentration, and termination abilities (Al-Tarawna 

& Al-Salihy, 2004). Moorhead and Griffin (2000) assert that employee creativity refers to the 

capacity to successfully transform novel ideas into practical applications for the creation of 

commodities, provision of services, or any other activity.  workers' knowledge refers to the 

process of equipping workers with professional, technical, and specialized information related 

to the industry, operations, and the ability to comprehend and adapt to the evolving business 

environment. In addition, another essential attribute of human capital is social competence, 

which pertains to the ability of employees to effectively interact and collaborate with one 

another. The cooperation among individuals within the organization is crucial for attaining the 

desired level of performance (Delery & Roumpi, 2017). 

To find out how employee views of human capital practices affect employee productivity and 

business success, Thuda, Sari, and Maharani (2019) undertook a research. The study used a 

correlation research technique with an emphasis on Indonesian service firms. The two 

independent variables at the focus of the study were worker productivity and human capital 

practices. Corporate performance, however, was the dependent variable. The results showed 

that the productivity and efficiency of each employee as well as the collective knowledge, 



19 

 

skills, and capacities of the company's staff had a substantial and beneficial influence on the 

business's overall success. These outcomes are consistent with research conducted by Abomeh 

and Peace (2015), which found that employee development and training initiatives directly 

affect a company's human capital and, in turn, its competitive stance.  

2.3.4 Customer Relationship Management and Sustainable Competitive Advantage  

In qualitative research undertaken by Alqershi (2020), the focus was on examining how 

customer relationship management (CRM) may serve as a competitive advantage for small and 

medium companies in Yemen. The study included analysing data from 247 organizations. The 

study focused on analyzing organizations at the unit level, with the various owners of the firms 

being observed. The study focused on a specific group of 1,441 businesses. To choose a 

representative sample, the research used the Krejcie & Morgan (1970) size table, which helped 

calculate the appropriate sample size.  The study used technology-based CRM, knowledge 

management, and a main customer focus as proxies for customer relationship management. 

The findings suggest that technology-based CR and the firm competitive advantage was 

significant  (p=0.04) with the study concluding that the direct positive effect is registered in the 

organizations marketing, product, process and service innovation capabilities. Application of 

technology in CR was also found to result in improved data integration and analysis of 

customer information. In line with the findings by Alipour and hallaj Mohammadi (2011), the 

study concluded that with the adoption of technology in the management of customers, 

organizations can assess potential customers’ needs and be able to proactively respond to them. 

The study concludes that the ability to respond effectively to customer changes has a net effect 

of improving the firm level of competitiveness.    

Anabila and Awunyo-Vitor (2013) conducted a study to explore the influence of customer 

relationship management (CRM) on the sustainable competitive advantage and survival of 

commercial banks in Ghana. Utilizing a cross-sectional research design, the study focused on 

25 banks and 54 customers. Data collection was executed through a questionnaire. The findings 

indicated that customer feedback capabilities, particularly those enabled by technology, were 

identified as a critical CRM practice significantly affecting the sustainable competitive 

advantage of banks. This underscores the importance of technology-driven customer feedback 

mechanisms in contributing to the competitive edge and long-term viability of commercial 

banks in Ghana. The ability of banks to provide timely feedback, facilitated by technology 

adoption, resulted in customer loyalty. These findings support those of Roh et al. (2005), who 



20 

 

found that technology-based CRM fosters customer loyalty, resulting in increased revenue and 

reduced costs. 

Kebede and Tegegne (2018) conducted research to determine how CRM affects the 

performance of banks in Ethiopia's Amhara Region, substituting knowledge management, 

organizational CRM, and technology-based CRM for individual bank CRM. Convenience 

sampling and a cross-sectional research strategy were employed to determine the study's 

participant population. A statistically significant p-value of 0.037 suggests that the application 

of technology-based CRM has a noteworthy and positive effect on performance. Commercial 

banks reportedly made substantial investments in information technology assets to enhance 

customer relationships throughout the entire purchase process, resulting in improved 

performance. 

Zaky (2017) aimed to evaluate the impact of information technology adoption on the 

sustainable competitive advantage of the Egyptian banking sector through the lens of CRM. 

The study included a sample of forty active banks in Egypt, investigating how institutions in 

the Egyptian banking environment could establish a long-term competitive advantage by 

integrating IT into CRM processes. The findings indicated that the use of information 

technology in CRM substantially and positively influences the performance of banks 

(p=0.000). IT applications in CRM enable the consolidation of client data in a centralized 

database, facilitating prompt responses to customer requests by the bank. Stefanou, 

Sarmaniotis, and Stafyla (2003) similarly concluded that utilizing IT in CRM improves a 

company's adaptability to changes in the business environment.  

2.4 Conceptual Framework  

Camp (2001) defined a conceptual framework as a well-defined structure that a researcher 

deems most suitable for describing the development of a natural event under investigation. The 

statistical conceptual framework organizes the key concepts of a research in a logical structure 

to graphically represent the relationships between ideas. The conceptual framework 

accentuates the worthiness of a research topic to be studied, as well as researcher’s assumptions 

and asserted remedies to a defined problem (Adom & Hussein, 2018). The framework shows 

a relationship between the independent (predictor) and dependent (outcome) variables. An 

independent variable affects the value of another variable and is not affected by the change of 

another variable’s value while a dependent variable changes in value following the change of 



21 

 

another variable like independent variable. Figure 2.3 shows a conceptual framework, which 

describes the relationship of the study variables. 

 

 

 

Figure 2. 3: Conceptual Framework 

 

Independent Variables       Dependent Variable 

 

The above conceptual framework sought to review the interaction between the technology 

adoption in an organization and sustainable competitive advantage. The dimensions of 

technology adoption in an organization investigated were level of automation, alternative 

channel, and optimization of HR and informed decision making. The dependent variable is 

represented by sustainable competitive advantage that is measured by cost management, 

differentiation and innovation.  

 

Level of automation, through digital account opening, mobile banking, automated loan 

processing, and e-signature adoption, enhances banks' competitiveness by improving 

operational efficiency, reducing costs, and accelerating service delivery. It strengthens 

customer experience, enables scalability, and supports regulatory compliance. These 

capabilities allow banks to differentiate their offerings, respond quickly to market changes, and 

Technology Adoption 

• Level of automation 

• Alternative Channel 

• Optimization of Human 

Capital 

• Customer Relationship 

management  

Sustainable Competitive 

Advantage 

 



22 

 

expand access, ultimately sustaining long-term competitive advantage. Alternative channels 

dimension as measured by online presence, mobile app usage, customer feedback, and online 

surveys, has the potential of increasing bank’s sustainable competitive advantage by deepening 

customer engagement, improving service responsiveness, and gathering real-time insights. 

These channels increase accessibility, strengthen brand loyalty, and enable continuous service 

innovation, allowing banks to adapt swiftly to evolving customer needs and stay ahead in a 

competitive market. 

 

In relation to the optimization of human capital, the adoption of different technologies that 

facilitate employee self-service, workforce analytics, and well-being initiatives, has the 

potential to affect sustainable competitive advantage by improving productivity, engagement, 

and retention. Empowered employees deliver better customer service, adapt more effectively 

to change, and drive innovation. Data-driven HR practices also align talent with strategy, 

fostering a resilient, high-performing workforce that supports long-term organizational 

success. Finally, CRM as measured by CRM efficiency tracking, mobile accessibility, 

automation, and real-time interaction, strengthens sustainable competitive advantage by 

enhancing customer engagement, personalization, and service responsiveness. Effective CRM 

systems deepen customer insights and streamline support. Mobile and automated CRM 

capabilities ensure consistent, proactive communication, enabling banks to build lasting 

relationships and adapt quickly to customer needs. 

2.4 Operationalization of Study Variable 

Operationalization of study variables helps in transforming abstract concepts into tangible, 

measurable variables with a view to enhancing the rigor, reliability, and validity of research 

studies. This will allow for meaningful data collection, analysis, and interpretation.  

 

 

 

 

 

 



23 

 

Table 2.1: Operationalization of Study Variables  

Variable  Indicators Data 

Collection 

Tool  

Data Analysis Supporting 

Literature  

Independent 

Variables  

    

Level of 

automation  

• Digital 

account 

opening 

• Mobile  

banking  

• ATM usage 

• E-signature  

Structured 

questionnaire ; 

5-point Likert 

scale 

Descriptive 

statistics; 

Standard 

deviation and 

mean, 

inferential 

statistics 

Laudon and 

Laudon 

(2019).  

Kemunto and 

Kagiri, 2018) 

Alternative 

Channel 

• Online 

presence 

• Mobile app 

usage 

• Content 

marketing 

• Customer 

feedback 

Structured 

questionnaire ; 

5-point Likert 

scale  

Descriptive 

statistics; 

Standard 

deviation and 

mean, 

inferential 

statistics 

Oteh, et al. 

(2017; Patel 

and Brown: 

2016) 

Optimization 

of human 

capital  

• Employee 

self-service 

• E-learning 

engagement 

Structured 

questionnaire ; 

5-point Likert 

scale 

Descriptive 

statistics; 

Standard 

deviation and 

mean, 

Hidaya, et al. 

2020; Thuda, 

et al. (2019) 



24 

 

• HR-

technology 

learning 

inferential 

statistics 

Customer 

Relationship 

Management  

• Software 

usage 

• Linking 

CRM to 

mobile 

• Real time 

interaction 

with 

customers 

Structured 

questionnaire ; 

5-point Likert 

scale 

Descriptive 

statistics; 

Standard 

deviation and 

mean, 

inferential 

statistics  

(Kebede & 

Tegegne 

(2018); 

Stefanou et al. 

(2003) 

Dependent 

Variable  

    

Bank 

performance  

• Cost 

effectiveness 

• Productivity  

• Customer 

satisfaction  

• Employee 

satisfaction  

Structured 

questionnaire ; 

5-point Likert 

scale 

Descriptive 

statistics; 

Standard 

deviation and 

mean, 

inferential 

statistics 

Kemunto & 

Kagiri, (2018)  

Kebede and 

Tegegne; 

(2018) 

Source: Researcher (2024) 

 

2.5 Chapter Summary  

This chapter covered the extant relevant literature relating to the research objectives by 

discussing the theoretical foundation anchoring each variable. Similarly, the section evaluated 

different empirical studies by scholars. The theories discussed with their relevance include 

Resource dependency theory, Technology Adoption Theory, Expectation Disconfirmation 



25 

 

Theory and Porters theory of competitive advantage. Relevant empirical literature covering the 

variables themes was also discussed, with the gaps that the current research would bridge 

discussed. Finally, the chapter conceptualized the variables relationship with the 

operationalization of the studies.  

 

 

 

 

  



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CHAPTER THREE 

RESEARCH METHODOLOGY 

3.1 Introduction 

This chapter outlines the research approach that guided the study. It encompassed the research 

philosophy, the selected research design, the targeted demographic for the study, and the 

intended sample size. Furthermore, it provided a comprehensive explanation of the data 

gathering approach and the methods employed to evaluate the acquired data. Subsequently, the 

strategies that were used to maintain the research's calibre and the ethical principles that were 

adhered to were elucidated.   

3.2 Research Philosophy  

Every research philosophy starts with the premise that people have different perspectives on 

the world, and that it is important to provide these perspectives a forum to be articulated via 

information exchange. Research philosophy, according to Saunders, et al. (2015), is a set of 

ideas that clarify how experts in a certain subject use their knowledge in their work. According 

to Krishnaswami and Satyaprasad (2010), research philosophy encompasses fundamental 

beliefs that researchers have about their perspectives on the world and their approach to their 

job. 

This study was grounded on the pragmatic viewpoint. Positivism, interpretivism, 

constructivism, and pragmatism are among the prevalent research philosophies. Pragmatism is 

used in this study, as opposed to other paradigms, with the aim of generating practical 

suggestions for enhancing management (Saunders, et al. 2015). Adopting a pragmatist 

philosophy for the study aligns with the overarching goal of understanding how technology 

adoption impacts a firm's sustainable competitive advantage. By using both quantitative and 

qualitative techniques and procedures, the pragmatic philosophy permits the creation of links 

between variables. The pragmatic nature of this strategy lies in its emphasis on finding the most 

effective solutions to address the research questions and accomplish the study's goals. A more 

thorough and nuanced knowledge of the intricate link between technology adoption and 

sustained competitive advantage in a corporate setting may be gained by the study by 

integrating quantitative and qualitative methodologies. This pragmatic approach acknowledges 

the flexibility needed to address the multifaceted nature of the research inquiry. 



27 

 

3.2 Research Design 

Research design, as defined by Sekaran and Bougie (2016), refers to a set of rules that are 

intended to achieve a certain target with little interference. This study used a descriptive 

research approach, which is appropriate for seeking to establish a link between variables. 

Descriptive research, also known as statistical research, provides a comprehensive account of 

the phenomena being studied. It is often used in natural and physical sciences to describe social 

events, structures, and circumstances. According to Gill and Johnson (2006), the aim of a 

descriptive survey design is to uncover the overarching characteristics of a specific group of 

subjects. It also helps in understanding an individual's genuine viewpoints and beliefs, thereby 

assessing how the situation aligns with the target group. 

3.3 Population of the Study 

A population of a study is a group of individuals or group of objects from which a sample is 

taken (Kombo & Tromp, 2018). The same position is pursued by Lavrakas (2013) who submit 

that a study is a finite or infinite group of individual elements with some common 

characteristics to which the study generalizes the results.  

The survey included all commercial banks that were operational in Kenya as of December 31, 

2023. As to the report of the Central Bank of Kenya on June 30th, 2023, there were a total of 

39 commercial banks that were officially registered and actively functioning in Kenya. This 

constituted the study's population (Appendix II) (www.centralbank.go.ke )   

3.4 Data Collection 

The primary data was gathered using a questionnaire as the primary instrument for data 

collection. A questionnaire, as defined by Schwab (2005), is a measuring tool that prompts 

participants to reply to a series of questions or statements. Kothari (2015) defines a 

questionnaire as a written document containing a series of questions arranged in a certain 

sequence on one or more forms. The questionnaire contained close ended questions with boxes 

to be ticked and contain boxes weighted from a Likert scale of 5 (to a great extent) and 1 (low 

effect) on the variable under consideration. The researcher targeted two respondents per bank. 

The target respondents were managers’ in-charge of the Information and Communication 

Technology (ICT) and the Business Development departments or equivalent positions in the 

respective banks.   

http://www.centralbank.go.ke/


28 

 

To evaluate the bank's performance, the researcher collected both financial and non-financial 

performance data using a balanced scorecard technique. A form for gathering data intended to 

record quantitative and financial information was included in the questionnaire. The 

questionnaire was divided into three sections: section B evaluated the many technological 

innovations used by the bank in its operations, while section A included the commercial bank's 

demographic data. Section C evaluated the bank's sustainable competitive advantage position.  

 3.5 Data Analysis 

Once the information is obtained, the questionnaires were cleaned with the aim of identifying 

those that will have conformed to the set criteria by the researcher in terms of completeness 

and consistency.  Responses were analysed to obtain the mean, standard deviations and 

percentages, indicating the significance of similarities and distinction. To attain this objective, 

the primary analytical tool was the Statistical Package for Social Sciences (SPSS). The 

gathered data underwent assessment through descriptive statistics. Additionally, a regression 

analysis was employed to ascertain the extent of the correlation between the adoption of 

technology and the attainment of sustainable competitive advantage.  

The regression equation assumed the following form: 

 

Bank competitiveness = f (x1, x2, x3, x4); 

Specifically, the regression was of the form; 

Y = βо + β1 x1+ β x2+ β3 x3 + β4 x4 + ε 

Where   Y = Bank sustainable competitive advantage  

βо =  Constant 

  x1 =          Automation Level  

  x2  =  Alternative channels 

  x3 = Optimization of human capital  

  x4 = Customer relationship management 

  ε = Error Term 

 



29 

 

3.7 Research Quality 

High-quality research is crucial to the collection and creation of data that can be analysed 

(Kothari, 2015).  The following research instrument sub-measures were monitored to raise the 

calibre of the study.  

3.7.1 Validity 

Validity, according to McMillan and Schumacher (2014), is the extent to which the world's 

phenomena and the explanation of reality are equivalent. How effectively a test measures what 

it is supposed to assess is known as its validity. To enhance internal validity in this research, 

the commercial banks that are currently in operation and have branches in Nairobi were 

targeted. In addition, the researcher planned to target the bank staff with the requisite 

knowledge on the organization’s technology adoption and its effect on the bank 

competitiveness. Staff in the ICT department, business development as well as finance were 

considered relevant in the study.  

3.7.2 Reliability 

According to Jack and Clarke (2012), reliability, as applied to a questionnaire, refers to its 

stability, repeatability, or internal consistency. This study aimed to assess the reliability of the 

research instrument by utilizing Cronbach’s Alpha, with a criterion set at a value greater than 

or equal to 0.7.  

 Acording to Zakariya, (2022), acceptable value of Cronbach`s Alpha should be 0.7 and above. 

The study used this principle to determine the reliability of the research instrument, and the 

table below presents Cronbach`s Alpha levels of the variables.  

Table 3.1. Reliability Test using Cronbach`s Alpha 

VARIABLE ITEMS Cronbach`s Alpha Interpretation  

Automation Level  10 0.926 Reliable  

Alternative Channels  9 0.805 Reliable  

Optimization of Human Capital 8 0.864 Reliable  

Customer Relationship Management 8 0.861 Reliable  

                                                                                                                                              

Table 3.1 indicates that all the variables had a Cronbach`s Alpha coefficient above the 

acceptable threshold of 0.7, affirming the reliability of the instrument. Based on these findings 

the study instrument was deemed consistent in measuring the intended constructs.  



30 

 

3.7.3 Diagnostic Tests 

Various diagnostic tests were conducted, encompassing normality, multicollinearity, and 

heteroscedasticity assessments. The normality test was employed to ascertain the distribution 

of data based on established normality criteria. Achieving normality in data enhances the 

precision of findings, thereby improving the internal consistency of data values. 

Multicollinearity, defined by Wooldridge (2013) as any correlation among independent 

variables in a sample, will be examined. Elevated levels of multicollinearity can inflate p-

values in a regression model, leading to inaccurate predictions. The correlation matrix was 

utilized to evaluate the extent of correlation among predictor variables. Following the criterion 

outlined by Greene (2012), which identifies a significant degree of multicollinearity with r or 

r2 values exceeding 0.8 or 64%, variables exhibiting such correlations were excluded from the 

analysis. 

Homoscedasticity, indicating that the error remains constant across values of the dependent 

variable, was also assessed. A scatterplot with residuals plotted against the dependent variable 

was used to check for homoscedasticity. The test involves examining whether there is a 

constant deviation of points from the center zero-line. If homoscedasticity was violated, 

indicating the presence of heteroscedasticity, adjustments were considered, potentially 

involving the removal of certain inputs from the model. 

3.7.4 Ethical Consideration  

An introductory letter was dispatched to the Human Resources departments of each bank, 

outlining the research objectives and emphasizing that the collected data is strictly intended for 

academic research purposes. Formal communication channels and measures were consistently 

employed throughout the entire data collection process. This involved securing authorization 

from the National Commission for Science Technology and Innovation (NACOSTI) to collect 

data from commercial banks operating in Kenya. 

Furthermore, the researcher sought explicit permission from the ethical review committee of 

Strathmore University, ensuring strict adherence to established conditions. Each participant 

was duly informed about their rights, encompassing confidentiality, anonymity, the right to 

skip certain questions, and the option to decline participation in the study. All information 

disclosed during interviews, including participant identities, were treated with the utmost 

confidentiality. As a gesture of appreciation, the researcher offered to share the research 



31 

 

findings with the respondents and express gratitude by sending a thank-you note upon the 

successful completion of the research. 

3.8 Chapter Summary  

This chapter comprehensively outlines all the methodological approaches that were employed 

during the research process. It elucidates the research philosophy to be adopted, the research 

design chosen, the targeted population, and the sampling design. Additionally, it explains the 

data collection procedure to be utilized during data collection and outlines how the collected 

data will be analyzed. As a result, this chapter offers a detailed and systematic explanation of 

the methods and procedures that guided the study. 

  



32 

 

CHAPTER FOUR 

PRESENTATION OF RESULTS 

4.1 Introduction  

This chapter presents the results of the analysis, findings and discussions of the study on the 

research objectives. The objectives of the study were to establish the effect of technology 

adoption capabilities on the sustainable competitive advantage of commercial banks in Kenya. 

4.2 Response rate  

The study target was 78 managers’ in-charge of the Information and Communication 

Technology (ICT) and the Business Development departments or equivalent positions in the 

respective 40 commercial banks in Kenya. The researcher issued 78 questionnaires from which 

73 were returned. Therefore, the response rate was 92.4% and it was considered excellent. This 

response rate concurs with stipulations by Mugenda and Mugenda (2003) that a response rate 

which is above 50% is representative for the target population. This is a summarised in Table 

Table 4.1: Response Rate 

Category Frequency Percent 

Returned 73 92.4% 

Not returned 5 7.6% 

Total 78 100% 

Source: Researcher (2025) 

4.3 Demographic Information Top of Form 

To understand the background of the respondents and their experience within the banking 

industry, this section collects essential demographic details. These aspects help in analysing 

the influence of technology adoption capabilities across different banks and employee 

categories. 

4.3.1 Bank’s Operational History 



33 

 

The number of years a bank has been in operation can influence its approach to technology 

adoption. Older banks may have well-established systems, while newer banks may be more 

agile in adopting new technologies. The study sought to determine the number of years a bank 

has been in operation. The results were as summarized in Figure 4.1. 

 

Figure 4.1: Bank’s Operational History 

According to the study findings, most respondents (45.2%) indicated that their banks had been 

in operation for between 41 and 60 years, while 30.1% reported working in banks that had 

operated for 21 to 40 years. This suggests that a significant portion of commercial banks in 

Kenya have long-established operational histories, which may influence their approach to 

technology adoption. Older banks are likely to have well-developed systems, legacy 

infrastructure, and structured processes that could either facilitate or hinder the adoption of new 

technologies. On the other hand, only 11% of the respondents were from banks that had been 

in operation for less than 20 years, and 13.7% were from banks with over 60 years of 

experience. The presence of both well-established banks and relatively newer institutions in 

the banking sector highlights the diversity in technology adoption capabilities. Newer banks 

may exhibit more flexibility in integrating innovative solutions due to fewer legacy constraints, 

while older banks might face challenges related to transitioning from traditional banking 

systems to modern, technology-driven operations. These variations in operational history are 

likely to impact the strategic adoption of technology and its influence on sustainable 

competitive advantage within Kenya’s commercial banking sector. 

11%

30.1%

45.2%

13.7%

0% 10% 20% 30% 40% 50%

Less than 20 years

21 - 40 years

41 – 60 years

Over 60 years



34 

 

4.3.2 Bank Size 

The size of a bank, in terms of the number of employees, may affect its ability to integrate and 

manage technological advancements. Larger banks often have more resources for technology 

adoption, while smaller banks may face budgetary constraints. The study sought to determine 

the number of employees in each bank. The results were as summarized in Figure 4.2. 

 

Figure 4.2: Bank Size 

According to the study findings, the majority of respondents (50.7%) indicated that their banks 

employ between 501 and 1,000 employees, while 24.7% reported that their banks have between 

1,001 and 1,500 employees. This suggests that most commercial banks in Kenya fall within 

the medium-to-large employee size category, which could have implications for their ability to 

adopt and implement new technologies. Large