Determinants of Multinational Corporations (MNCS) investment in Kenya

Abstract

Foreign Direct Investments have grown and continue to grow as well as playing significant roles in growth and development of many economies in the world by contributing to the Gross Domestic Products. However; In Kenya FDIs have performed below expectations due to the combination of various factors which attract FDI. The determinants of foreign direct investments have become an important topic not only for the governments, policy makers but also for academic research. This study intended to examine the determinants of multinational corporations‟ investment in Kenya. The study was designed as a descriptive survey of MNCs in Kenya. The target population was 43 MNCs but only 35 (81%) agreed to take part in the final survey. Primary data was collected using questionnaires and were administered to the managers in the selected MNCs by the researcher. Data was analysing using SPSS where descriptive analysis was used and results presented in tables and charts. The results showed that the most significant factors that affected the decision to invest in Kenya were stable and growing economy (mean = 4.49, SD = 1.32), the availability of a market in Kenya and neighbouring countries (mean = 4.29, SD = 1.07), political and economic stability (mean = 4.20, SD = 0.92), and the resources and raw material availability (mean = 4.17, SD = 0.95). The study concludes that the major determinants of MNC investment in Kenya are stable and growing economy, the market in Kenya and those of the neighbouring countries, political/economic stability, availability of resources and raw materials, human resource availability, entrepreneurial spirit in Kenya, financial systems, strategic infrastructure, economic liberalisation, EPZ concessions, Kenya‟s popularity, and cheap labour. The study recommends that for the Government of Kenya to attract more foreign investors to Kenya, one of the issues that must be focused on is marketing our strategic position in East Africa which has been a centre of focus when MNCs want to invest in Kenya. The study also recommends that the Government needs to work on growing the economy more and ensuring stability of economic development. The study further recommends that MNCs need to invest in Kenya more as there is readily available resources in terms of human and raw materials and therefore human capital will not be a hindrance in investing in Kenya. With the port of Mombasa and the proposed Lamu port, Kenya stands at a better position for investors and therefore more foreign investors should take interest in investing in Kenya as we have the largest port in East Africa and will soon have more than one port which will enhance efficiency.