Strategic Innovations and Financial Performance of Registered Private Security Firms in Nairobi County, Kenya.

Abstract

Despite the rapid growth of the private security sector, driven by increasing security needs in the country, their financial performance has declined. Several private security firms reported a decline in net profit and a 5% decrease in market share, indicating severe financial constraints, primarily due to investments in vital innovations. Therefore, this study sought to determine the effect of strategic innovations on the financial performance of registered private security firms in Nairobi County, Kenya. It was guided by these objectives, assessing the effect of business process innovation, customer experience innovation, and workforce management innovation, and examining the moderating effect of government policies on the relationship between strategic innovations and the financial performance among registered private security firms in Nairobi County. The study was underpinned by the Resource-Based View theory and other theories, including Innovation Diffusion Theory, Modigliani and Miller Theory, and Public Interest theory, which served as the foundation for the moderating variable. The study was guided by descriptive and correlational research designs. The population comprised employees from all 64 private security firms registered with the PSRA in Nairobi County, categorized under KSIA. The target population focused on senior managers across five functional departments in all 64 firms, totaling 355 employees. The study determined the sample size using Yamane (1967) formula, which resulted to 188 respondents. The study applied stratified sampling techniques to cluster respondents into groups. The primary data was collected through semi-structured questionnaires. The study pretested 18 respondents from PSIA firms that are registered with PSRA in Nairobi. The study was guided by content and face validity. While the reliability was assessed using Cronbach's alpha coefficient which was assumed to be >0.7. The study analyzed both descriptive statistics, using minimum, maximum, means and standard deviations. While the inferential statistics was analyzed using correlation and regression analyses. The data was analyzed using SPSS version 29.0. The findings of the study showed that all the three constructs, business process innovation, workforce management innovation, and customer experience innovation had a positive and statistically significant effect on the financial performance of private security firms in Nairobi County, Kenya. Additionally, the findings also highlighted that government policies significantly moderated the effect of the relationship between strategic innovations and financial performance, demonstrated by increased the R-squared value from 51. 2% to 72. 1%. Finally, the study recommended that private security firms should prioritize continuous training and development to enhance their workforce's technological skills.