| dc.description.abstract | The general benefits of foreign direct investment (FDI) for emerging economies are well
documented. Given the appropriate host-country policies and a basic level of development,
various studies show that FDI results in technology spillovers, enables human capital formation,
improves international trade integration, helps create a more competitive business environment
and improves enterprise development. All of these result in higher economic growth, which is a
crucial tool for alleviating poverty in developing countries. This study explores the impact of
foreign direct investment on the Kenyan economy using FDI and GDP inflow data series from
2004 to 2013. The Statistical Package for Social Sciences was used to analyse the data where
descriptive analyses, frequencies and trend analysis, as well as inferential analyses involving
Analysis of Variance (ANOVA) and Correlation analysis to establish relationships between the
variables. Graphical trend analysis of FDI and GDP reveals a direct positive relationship between
the two variables. The Pearson correlation was computed for GDP and FDI inflow data series
resulting in a correlation coefficient of 0.937 at the 0.01 (2 tailed) significance level which
indicates a strong positive correlation between the variables; this in turn means that there is a
significant direct proportional relationship between foreign direct investment and economic
growth in Kenya. These findings have led to the conclusion that the impact of foreign direct
investment on the Kenyan economy is a positive one. As such, we can say that FDI promotes
economic growth and suggest that the Kenyan government embrace policies that aim to attract
more foreign direct investment while micro-managing the same to avoid the negative impacts of
FDI on local firms such as crowding out. Policies such as opening up of the economy by
engaging in more bilateral and multilateral trade agreements, improving the quality of
infrastructure by way of channeling more resources to its development especially in marginalized
regions of the country in the backdrop of the discovery of oil and water in Turkana, and
demonstrating more political will in the fight against corruption so as to instill more confidence
on foreign investors. These policies may enhance the attraction of FDI thereby increasing
economic growth. | en_US |
