Determinants of Foreign Direct Investment in Kenya: a Theoretical review
Journal Title: Scholars Journal of Economics, Business and Management - Year 2015, Vol 2, Issue 10
Abstract
Abstract: Manufacturing in Kenya has been on the decline for a considerable period of time with its contribution to GDP stagnating at 10% from 1960’s. The performance of manufacturing sector is affected by low capital injection, limited access to finance and poor institutional framework which has resulted in limited FDI into the country. The challenge facing Kenya is how to attract more FDI in dynamic products and sectors with high income elasticities of demand away from the primary sector. There is a lot of literature written on determinants of foreign direct investment (FDI) in Africa. The present paper has focused on the extent to which a combination of institutional policy and other determinants of FDI determine growth of FDI in the manufacturing sector of the Kenyan economy. The main argument of this review is that ownership, location and internalization determinants together with institutional determinants influences flow of FDI in a country. This paper using data on FDI inflows in the Kenyan manufacturing sector and selected determinants performed a cross-sectional analysis for the period 2008-2013. This review posits that there is significant positive relationships between market size of the economy, trade openness, governance and FDI growth which implies that these variables determines growth of FDI in the Kenyan manufacturing sector. It is expected that a combination of ownership, location and internalization (OLI) together with institutional determinants influences flow of Foreign Direct Investment (FDI) in a country. Keywords: Foreign Direct Investment; Corporate Governance; Political Risk; Manufacturing Sector; Multinational Enterprises.
Authors and Affiliations
Njoroge Samuel, Namusonge Gregory, Sakwa Maurice
Keywords
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