DefinePK

Abstract

This study explores the relationship between strategy formulation processes and innovation performance within microfinance banks (MFBs) in Pakistan, emphasizing the moderating role of competitiveness. Recognizing the critical role of innovation in sustaining growth and relevance in today’s competitive financial sector, the research focuses on two key dimensions of innovation performance: service innovation performance (SIP) and organizational innovation performance (OIP). Drawing on the Resource-Based View (RBV) and Dynamic Capabilities Theory, the study proposes that effective strategic planning enhances both external service delivery and internal organizational processes. Data were collected through a structured survey administered to 212 employees across eight microfinance banks, with analysis conducted using regression and moderation techniques in SPSS and interaction. The findings demonstrate that strategy formulation has a significant positive impact on both SIP and OIP, with slightly greater emphasis observed on service-related innovations. Furthermore, competitiveness significantly strengthens these relationships, suggesting that MFBs operating in more competitive environments are better positioned to leverage strategic planning for innovation. The study provides valuable theoretical contributions by extending existing strategic management frameworks to emerging market microfinance institutions, and offers practical insights for managers and policymakers aiming to enhance innovation through targeted strategy development in competitive contexts.