Problems of internationalization of operations by Kenyan Insurance firms
Abstract
There is a notable absence of empirical studies locally conducted to determine the problems of
internationalization of operations by Kenyan insurance firms. Globally some scholars have
also lamented on the paucity of research progress in general and a lack of theoretical and
empirical rigor of exciting studies in internationalization of services. Internationalization of
small firms especially from a developing country’s perspective has received little attention in
academic enquiry. A review of local literature shows that although there have been several
research studies done on the insurance industry; none touch on the problems of
internationalization. Even more numerous studies have looked at internationalization of
operations in other service industries with a strong emphasis on Kenyan banks. The study
established primarily that lack of knowledge and expertise to assess opportunities in foreign
markets hinders the internalization of the operations of insurance firms. Study findings from
chapter four indicate that 37.8% of the insurance firms have not internationalized their
operations. The majority of those that have internationalized have operations in Tanzania
followed by Uganda which validates the Upsalla model of internationalization on the aspect of
psychic distance. The study also indicated that network of branches, joint ventures and merger
and acquisitions do not form the current operations in the countries Kenyan insurance firms
are operating. However, the study established subsidiaries was the preferred mode of entry for
the majority of the insurance firms in foreign countries. The study findings indicated that
firm’s motives in setting up operations in another country are based on search for new
markets, incentives offered by the regional integration, firm’s strategy and financial and
political risk diversification strategy. Client following, increasing shareholder wealth and
bandwagon effect does not motivate Kenyan insurance firms to venture in other foreign
markets. Host government laws, political instability, gaining client confidence and
competition from local firms were also established to be major problems for the
internalization of the operations in the foreign market for Kenyan insurance firms. In addition
to lack of knowledge and expertise to assess opportunities in foreign markets, lack of capital
to finance expansion, domestic market focus and lack of support from the Kenyan government
impedes the internationalization of insurance firms. In effect the findings herein tended to
support the Upsalla model of internationalization and the upper echelons theory in as far as
respondents confirmed that a lack of knowledge and expertise hindered the
internationalization of firms and further that so many of the firms were focusing on the local
market alone to the exclusion of opportunities in the regional market.
The study recommends that host countries should enact laws that enable a fair competitive
environment for the operations of the foreign insurance firms. Trade restrictions should be
abolished for East African Region to enhance the internationalization of operations by Kenyan
insurance firms. Political stability should be embraced within East Africa region to encourage
internalization of Kenyan insurance firms. Peaceful nations attract foreign investors since
security and protection of investments is assured. The government of Kenya should support
insurance firms who are willing to expand their market base beyond Kenya. There is therefore
urgent need to relook the regional integration strategy to come up with solutions uniquely
Kenyan to facilitate internationalization process. This can only be attained through
engagement and deeper consultations with the stakeholders.
Publisher
University of Nairobi
Subject
Kenyan Insurance firmsDescription
Thesis Master of Business Administration