Effect of Digital Sensing Capability on Competitive Advantage of Commercial Banks in Kenya

Abstract

The purpose of the study was to examine the relationship between digital sensing capability and competitive advantage among commercial banks in Kenya. The study adopted a post-positivist research philosophy and an explanatory research design anchored on Dynamic Capabilities Theory. The target population consisted of 370 respondents drawn from the 37 commercial banks in Kenya. Stratified random sampling was employed to select 192 respondents, comprising Chief Executive Officers and Heads of key departments, including finance, marketing, human resource, strategy, customer relations, operations, credit, information and communication technology, risk and compliance, and internal audit. Primary data were collected using a self-administered questionnaire and analysed using descriptive and inferential statistics with the Statistical Package for the Social Sciences (SPSS) version 25. Descriptive statistics included frequencies, means, and standard deviations, while ordinal logistic regression was used for hypothesis testing. Digital Sensing Capability was positively and significantly associated with higher Competitive Advantage (β = 6.932, SE = 0.817, Wald = 71.988, p < .001). The Nagelkerke Pseudo R² was 0.749, indicating a substantial improvement in model fit relative to the intercept-only model. This value is reported as a pseudo-R² index and is not interpreted as a percentage of variance explained, because pseudo-R² does not have the same meaning as R² in ordinary least-squares regression. Higher Digital Sensing Capability was associated with greater odds of higher Competitive Advantage. Commercial banks should continuously strengthen digital infrastructure, monitor customer behaviour and fintech developments, and use market intelligence to anticipate emerging opportunities and threats. Consistent with Dynamic Capabilities Theory, continually renewing digital sensing capabilities enables banks to adapt rapidly and sustain competitive advantage. Managers should implement structured digital sensing frameworks that integrate market, technology, and internal sensing into strategic planning to enhance competitive advantage among commercial banks in Kenya.