In a highly competitive environment, innovation is the essential key to a firm obtaining a dominant position as the understanding of strategic innovation management practices leads to an improved organizational performance signifying its importance. In the present era of economic instability, the banking industry has emerged as one of the major and vital service industries, which affects lives of several people all over the world which leads to the need to study the effect of innovation strategy on organizational performance of selected deposit money banks in Lagos state, Nigeria. The study in achieving this purpose explored the effect of variables of innovation strategy which include product innovation, process innovation, marketing innovation, organizational innovation on variables of organizational performance which consists of product performance, return on equity, market orientation and return on investment.
Descriptive survey research design was adopted for the study. The population of the study consists of management staffs at the strategic and operational management level from five selected deposit money banks in Lagos State giving a population of 665 which was chosen as our sample size. A structured questionnaire was administered which gave a response rate of 85.4%. The instrument was validated and the Cronbach;s Alpha reliability for the major constructs. The data gathered was analyzed through descriptive, linear and multiple regression analysis.
Findings revealed there is a positive and significant relationship between innovation strategies and organizational performance (R = 0.79.3, at p<0.05). The model R2
(coefficient of determination) was 0.629, constant value (alpha) of 4.212, the coefficient of independent variable (beta = 0.764) and F-Value yielded 626.633. Product innovation had significant effect on product performance and this effect was statistically significant at (R = 0.768, R2
= 0.589, p < 0.05). There is also a significant and positive relationship between market innovation and market orientation (R = 0.634, R2
= 0.402, p < 0.05). The effect of process innovation and return on equity shows a positive and significant relationship at (R2
= 0.751, R = 0.563, p < 0.05). A positive and significant effect was established between organizational innovation and return on investment with R2
= 0.725, R = 0.525, p < 0.05.
In conclusion, innovation strategies have a strong positive relationship on organizational performance of deposit money banks in Lagos State, Nigeria. Innovation strategies have been shown to be vital to boosts the output of organizations and the study has recommended that deposit money banks should adopt innovation strategies to increase their returns on investment, product performance, market orientation and return on equity which together will lead to their increased organizational performance.