In a knowledge economy most business processes are viewed through knowledge capability. However, the real challenge is in developing an adequate system of knowledge management in companies that will give them a competitive edge. The question is; how do firms develop knowledge capability, and what is the effect of strategic knowledge capability on a firm’s performance? This research sought to find out the relationship between strategic knowledge capability and performance in commercial banks in Kenya with specific interest on the mediating role of innovation. Specifically, the study sought to find out how organizational structure impacts on the performance of commercial banks in Kenya. The study employed the social survey methodology of study, using questionnaire as the main tool for data collection. The data collected was analyzed quantitatively using both descriptive and inferential statistics to help establish how possession of strategic knowledge capability affects the performance of commercial banks in Kenya. To actualize this, data was collected using a single questionnaire distributed to each of the Chief Executive Officers of all forty-three banks. A drop and pick later procedure for questionnaire administration was used to distribute them. Data gathered was then analyzed quantitatively using both descriptive and inferential statistical tools; specifically Analysis of Variance (ANOVA) and regression analysis, with the finding that organization structure had no significant influence on both innovation and performance in commercial banks in Kenya. The conclusion that the strategic knowledge capability defined by organization structure had no significant effect on the performance in commercial bank was reached.
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