Implementation of Foreign Direct Investment as an Internationalization Strategy by Kenyan Firms in the East African Community

Abstract

Firms in developing countries have in the recent past adopted foreign direct investment as a strategy to expand its market and increase revenues. The ideology of the East African Community has also come of age in the recent years with the formation of the new EAC which increases the number of members of the EAC to five from the original three. This study focused on the experiences of Kenyan firms implementing FDI in the EAC, together with the challenges that the firms have gone through and the factors that have promoted successful implementation of the same. The study adopted a census survey research design and the population of the study comprised of 34 Kenyan firms that have invested in the EAC. Primary data was collected by use of questionnaires. The study found out that most Kenyan firms are satisfied with the level of success of their investment in the EAC and that foreign direct investment was the right strategy for the firms in their quest to internationalize. It was also found out that the involvement of senior level management is important for successful implementation of foreign direct investment together with the firms experience in the home market. Of the challenges of implementation of foreign direct investment beuracracies and duplicity of government agencies, corruption and regulations were found to be the major challenges while geographical proximity, host governments openness to foreign direct investment and protection of foreign investors were the factors that promoted successful implementation of foreign direct investment. Finally it was concluded that more still needs to be done to promote FDI within the EAC. The study recommends that further research could be carried out to identify industry specific factors that promote and pose challenges to the successful implementation of foreign direct investment by Kenyan firms. Another possible area of research would be to identify other firms not covered in the research and find out their experiences and challenges.