| dc.description.abstract | Empirical studies have confirmed that FDI inward stock spurs economic growth since it is the
investment in the real sector of the economy while FDI net inflows which is volatile negatively affects
economic growth. Most Sub Saharan African countries endeavor to attract FDI stock because of its
known importance as an instrument of economic growth and development. Africa’s quest for FDI is
evidenced by the formation of the New Partnership for Africa’s Development (NEPAD), which is
seen as the vehicle for attracting of foreign direct investment to Africa.
This study investigated determinants of FDI stock in Kenya. Secondary data were used and sourced
from the United Nation Centre on Trade and development (UNCTAD), World Bank database,
Transparency International and Kenya National Bureau of Statistics. The period of study was 1980–
2012. Linear Regression Model was used to examine the determinants and Granger causality test to
analyze and establish the nature of relationship between FDI inward stock and its determinants.
Results suggest that rate of return, inflation, quality infrastructure, quality of institutions, cost of the
factors of production, discount rates, openness of the economy and GDP growth rates of Kenya
affect FDI stock. Economic growth of OECD countries, cost of factors of production, and rate of
return have been found to be very significant at 2.12, 4.83 and 2.91 respectively. The study therefore
recommends FDI stock should be encouraged in sectors with potential competitive advantages and
where complementarity with domestic investments is likely to be high. Also, the government will
have to promote effectively the development of technological and human capital capabilities in order
to attract FDIs in higher-value added activities, as well as to ensure Kenya can assimilate these
technologies effectively. | en |
