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Abstract

The review of the literature indicates that banks that emphasize innovation get larger market share and that larger market shares are associated with higher revenues and profitability. It is concluded that, since change is inevitable, innovation facilitates the process of adaptation of this change by almost all organizations including banks. Therefore, for banks to survive and enhance their performance, they have to fully embrace especially product, process and marketing innovations. Against this backdrop, this paper aims at proposing a research model to examine the role that innovation plays in driving banks performance in the Nigerian context. Specifically, the paper developed a research model comprising of product, process, marketing, and organizational innovations as independent variables and organizational performance as a dependent variable for empirical testing in the Nigerian banks.

Keywords: Bank performance, innovation, product innovation, marketing innovation, process innovation and service innovation.

1.Introduction

The international financial environment is changing rapidly as economies and financial systems across the world are undergoing difficult years in terms of financial performance. This trend caused international wave of mergers and acquisitions that have swept the banking industry in many countries (Uwuigbe & Fakile, 2012). The contribution of banks to the economic growth and development of any nation cannot be over-emphasized because of the critical role they play in the economy. Well-functioning banking systems exert a first-order impact on economic growth and development (Levine, 2005). Banking systems, however, do not always function in a beneficial manner and thus at times fall short of achieving this important goal of driving economic growth and development.

Therefore, bank performance is of major concern to economic planners, policy makers and researchers alike due to the fact that the gains of the real sector of the economy depends, to a large extent, on the efficiency with which the banks perform the function of financial intermediation which shapes the economy (Sharma & Mani, 2012). For quite some time, the performance of banks in Nigeria remains an issue of concern to all stakeholders. For example, in 2013 Obamuyi confirms that banks performance in Nigeria remain unimpressive for the last decade. This shows that the opportunities for making profits by banks in Nigeria are gradually reducing. Also a study (Obamuyi, 2011) indicated that the declining profits were caused by...

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