Influence of dynamic capabilities moderating the relationship between strategic innovation and financial performance of Commercial banks in Juba, South Sudan.

Abstract

This study aims to examine the influence of dynamic capabilities as a moderating factor in the relationship between strategic innovation and the financial performance of commercial banks in Juba, South Sudan. Empirical evidence indicates that banks with higher levels of these capabilities are better equipped to adapt swiftly to volatile economic conditions, leverage technological advancements, and optimize resource utilization, resulting in improved profitability, market share, and operational efficiency. The study underscores the importance of developing internal capabilities and fostering strategic collaborations in South Sudan’s challenging environment, characterized by infrastructural and institutional instability. The findings present strong evidence that dynamic capabilities significantly strengthen the positive relationship between strategic innovation and financial performance in Juba's banks. The analysis shows that including dynamic capabilities as a moderator increases the model's explanatory power to 65.2%, with effect sizes for all innovation, particularly information technology adoption, improving by around 18%. The strongest moderation effect was observed when combining all strategic innovations, which increased the effect size by over 21%, explaining an additional 15.2% of variance in financial performance. It concludes that strengthening dynamic capabilities is crucial for translating innovation into sustainable financial performance, recommending that banks invest in capability development programs, adopt adaptive regulatory policies, and build strategic alliances to foster resilience, promote financial inclusion, and support long-term growth in the emerging banking sector.

Keywords:  Dynamic Capabilities, Strategic Innovation, and Financial Performance.