The main objective of this study was to determine the influence of service innovation on the competitiveness of Kenyan commercial banks. The research employed Schumpeter's theory of dynamic capacity and innovation. To evaluate the link between service innovation and competitiveness of Kenyan commercial banks, a descriptive survey technique with means and standard deviation was employed. The census research included a sample of 43 commercial banks, and the data obtained from the study was put to basic regression analysis to examine the relationship between the variables. On service concept innovation, nearly the respondents agreed with all statements except customer care operators with service experience. On customer value, strong collaboration with customers, improvement of service operations and benchmarking service outcomes with rivals were all strongly supported. It was further indicated that most of the banks innovated their channels using web and mobile banking. Use of bank agents and partnering and use of direct mails were also highly supported as methods of channel innovation. Use of automated teller machines was not so highly supported aa a means of attaining competitiveness. For organizational learning innovation all statements were highly supported except changes in organizational routines. The regression analysis results indicate that 57.9 % of the dependent variable was explained by service innovation. ANOVA test revealed a statistically significant link between service innovation and competitiveness. It is concluded that the findings support the theories anchoring the study. Recommendations are finally made for practice, policy and future research.

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