An Evaluation of Factors Affecting Foreign Direct Investment Inflows in Africa; a Case Study of Kenya 1990-2011

Abstract

Foreign Direct Investment (FDI) is among the most dynamic international resource flows to developing countries. FDI’s is usually a mix of investments in both tangible and intangible assets and firms that deploy such assets are often important players in the global economy. Many argue that FDI can be expected to facilitate the transfer of new technology, help improve workers’ skills and welfare in recipient countries. Others argue that FDI focuses primarily on resource extraction and may have little broad contribution to recipient economy. But what are the determinants of FDI? What is the role of infrastructure, political stability and sustained economic growth or decline? This paper attempts to answer these questions for the economies of Africa using Kenya as a case study for the period 1990-2011. Using panel data methods, this study finds that infrastructural development has a positive role in FDI inflows in a country, political instability this study finds has a negative effect on FDI inflows. Lastly, the paper finds that sustained economic growth or decline has no real impact on FDI inflows in Kenya,