The Impacts of Terrorism Acts on International Business Investment Decisions by Multinational Companies Operating in Kenya

Abstract

Terrorism can negatively impact growth, investment and trade flows. This research study was aimed at identifying the impacts of terrorism acts on international business investment decisions by multinational companies operating in Kenya. The issue of global terrorism has assumed a frightening and dangerous dimension across the globe to an extent that an individual’s safety in a nation cannot be absolutely guaranteed, Kenya in the recent past has experienced its share of terrorism and terrorist related activities with big magnitudes reported in Nairobi and Mombasa counties. Terrorism raises the risk and cost of doing business irrespective of the nature of business. The main objective of this research were to understand how terrorism acts have impacted on international business investment decisions by multinational companies operating in Kenya and to seek out possible mitigating measures of terrorism risk. The value of the study is to assist the international firms in the analysis of direct and indirect effects of terrorism on business investment decisions in order to come up with business continuity plans, business resilience strategies, crisis management programs and disaster planning and recovery measures for the business survival in the event of and after the acts of terrorism. Though political factors are not only determinants which decide the whole investment decision by multinational firms many empirical studies have found the correlation between political factors and investment decision. The study used a descriptive survey research design to explain how terrorism has impacted on international business investment decisions by the multinational firms operating in Kenya. The target population was multinational firms operating in Kenya.The researcher targeted 20 multinational companies whose list is attached as appendix three. The researcher got a sample size of five multinational firms. The researcher also used systematic random sampling to come up with a sample size. Structured questionnaires were used to collect primary data. The questions format was based on a five point Likert scale. The researcher obtained an official introduction letter from the University of Nairobi to clarify to the audience the purpose of study. Upon receiving clearance the researcher distributed the questionnaires. After distributing and collecting the questionnaires, they were coded and edited for completeness using the statistical package for social services SPSS. Quantitative data was analysed using descriptive techniques like frequencies distribution, percentages, means, modes, medians and standard deviations. In addition correlation analysis was done to establish the relationships that exist between the level of terrorism and international business operations in Kenya. Eventually data was presented using frequency tables. The study observed that international business investment of multinational companies was clearly affected by the level of terrorism acts in the country. Foreigners were more likely to invest in multinational companies that did not prove a threat to the investments made. It was also evident from the research that terrorism acts in the country increased the cost of security to the MNCs thereby reducing the level of return on investments in these firms. Terrorism acts affected growth, development and financial performance of these multinational firms it was noted that most respondents believed that increased terrorism acts affected the daily routine of these firms hence causing a reduction in return on investments, growth and development of the multinational companies. This research paper concludes that if a country does not confront its political problems, it is obvious that the country will be excluded in the list of future investment plan of multinational companies. To determine and to get rid of the major political barriers and risks to foreign investment development is the first step which Kenya should exercise in order to attract more inward foreign investment.