Dynamic managerial capabilities, digital innovation and perceived financial performance in the banking sector

Abstract

The contemporary digital economy requires businesses to utilise creative skills to boost their performance. Utilising the Dynamic Managerial Capability (DMC) theory, we examine the influence of managerial capabilities—human capital (MHC), social capital (MSC), and cognition (MC) —on digital innovation (DI) and perceived financial performance (PFP) within the banking sector. The mediating influence of MC and DI on the link among MSC, MHC, and PFP was assessed. To achieve this, 728 bankers in Ghana were purposefully sampled, adopting a seven-point Likert scale for data collection regarding managers and employees. The analysis was conducted using the Partial Least Squares – Structural Equation Modelling (PLS-SEM). The results demonstrate that managerial cognition influences the interaction among managerial social capital, managerial human capital, digital innovation, and performance, with digital innovation not serving as a mediator. Managerial cognition serves as a conduit to human managerial capital, impacting perceived financial performance. The findings compel managers and policymakers to integrate DMC's initiatives to enhance banks’ digital innovation, which is essential in the contemporary dynamic and digital landscape. The assessment has expanded the framework of dynamic capability theory in nascent communities, underscoring the influence of DMC on advancing digital innovation within the banking sector.