Determinant of Foreign Direct Investment Spillovers; Kenya’s Domestic Firms Case
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Date
2016-09
Authors
Mugendi, Charles Ndegwa
Njuru, Stephen Gitahi
Journal Title
Journal ISSN
Volume Title
Publisher
Center for Promoting Ideas
Abstract
Developing countries and emerging economies increasingly see foreign direct investment (FDI) as a catalyst to
the development of domestic firms. This development can be through spillover effects whose presence can affect
development of business enterprises in the host economy. FDI in developing countries is perceived not only as a
source of capital inflow, but also as a vehicle for acquiring modern technology and the necessary managerial
know how that these countries require for development. These are some of the reasons why most of the developing
countries have continued to pursue domestic policies that encourage more FDI inflows. Many countries have
gone further than simply removing barriers to inward foreign investment and have taken a more proactive
approach towards attracting FDI through the use of fiscal and financial incentives. It appears therefore, that
although the aggressiveness and effectiveness of the government’s policies in prompting FDI growth not been
refuted, the effects of FDI on domestic firms and factors that determine spillovers are far from clear. Therefore,
this study investigates the main firms’ characteristics that determine FDI spillovers. Firm level primary and
secondary panel data were collected for the period 2012 to 2015. A structured questionnaire was administered to
both domestic and foreign firms from different sectors. FGLS techniques was used and it was evident that firms
that had skilled workers, high technology and research and development expenditure were able to attract
horizontal and vertical spillovers.
Description
A Research Article in the Journal of Business & Economic Policy
Keywords
Foreign direct Investment, Spillovers: determinants, FGLS
Citation
Mugendi, C.N and Njuru S.(2016): Determinant of Foreign Direct Investment Spillovers on Domestic firms; A case of Kenya’s domestic firms. Journal of Business and Economics Policy, 3(3),http://jbepnet.com/journal index 2245 September 2016.