Effect Of Foreign Direct Investment On The Growth Of The Manufacturing Sector In Kenya
Abstract
There exists compelling evidence to prove that FDI has a notable and useful impact to spur
the development of countries economically. FDI can be thought of as a medium for relaying
physical assets and non-physical assets like the latest technological developments, and the
best managerial skills and innovations. In theory, capital creation and advancements in
technology drive economic growth, therefore, it is logically a good driver of development
in receiving countries. Economists suggest that it is an essential component of development
among developing nations. This exercise attempted to find out the effect that FDI had on
manufacturing sector development in a country like Kenya. The independent variables
were direct foreign investments, the rates of interest, the rates of inflation and exchange
rates. Growth of the manufacturing sector was the response variant which the study tried
to elaborate. This was estimated by contribution of manufacturing sector to GDP. The
author gathered data for a decade (January 2009 to December 2018) on a quarterly timeline.
The study used a cross-sectional research design and a multiple linear regression model
that analyzed the relationship between the variables. Statistical packages version 21 was
used to analyze the data. The results of the study produced R-square value of 0.614 which
meant that 61.4 percent of the changes in growth of the manufacturing sector in Kenya
could be shown by the selected independent variables while 38.6 percent in the variation
was associated with other factors not covered in this research. The study showed that the
independent variables had a strong relation with growth of the manufacturing industry
(R=0.78.4). ANOVA findings showed that the F statistic was significant at 5% level with
a p=0.000. This model was fit to show the growth of the manufacturing industry. The
results also showed that only exchange rates were significant determinants of growth of the
industry. The study suggested that measures were needed to improve and develop the
manufacturing industry by controlling the prevailing levels of exchange rates.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
- School of Business [1420]
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