Foreign Market Entry Strategies and Competitive Advantage of Fintech Companies in Kenya

Abstract

The purpose of this study was to establish whether foreign market entry has an influence on competitive advantage of fintech companies in Kenya. The study was anchored by two theories: the Eclectic Paradigm Theory by John H. Dunning, and the Imitation Gap (Technology Gap) Theory by Michael V. Posner. The literature review identified the ownership, location and internalization advantages that impact competitiveness. It also identified new technology as a factor that creates first mover advantages that bring about competitive advantage. The study embraced a cross-sectional design and employed use of primary data collected from the research population of 25 fintech companies in Kenya that have ventured into other countries. The study targeted senior management-level employees of the fintech companies under study, with each company making one submission to the online questionnaire. The results of the data collection were analyzed using descriptive analysis and correlation analysis. The results of the study showed that majority of the fintech companies prefer to open offices countries as an entry strategy. The findings also showed that ownership of financial resources played a huge role for fintechs undertaking internationalization. Technology, R&D and innovation capacity was highly rated as a critical driver of fintech companies’ competitive advantage, as well as customer satisfaction. The study found that there was a statistically significant positive relationship between competitive advantage and foreign market entry. The study concludes that ownership of resources, selection of a conducive foreign market location and the technological capacity to offer superior fintech services were key when venturing into foreign markets. Opening of country offices or subsidiaries is an important driver of competitive advantage for foreign market operations, as the investment spurs high levels of customer satisfaction and confidence in the fintech products or services. The study recommends that fintech companies in Kenya should seek to scale their operations and internationalize into other countries in Africa, as there exists demand for their financial solutions. The study was limited in terms of the fintech population size and suggests that future studies utilize a larger population size in future, as well as utilize financial performance metrics rather than qualitative metrics that were used to measure competitive advantage in this study.