Overall Determinants of Foreign Direct Investment Inflows in Kenya

Abstract

Since 21st Century, developing countries such as Kenya, consider the role of FDI inflows as catalytic to their micro-economic performance. The current literature is therefore full of information on micro-economic determinants of FDI inflows without regard to sector-specific considerations. Literature, however, asserts that factors that investors take into consideration when planning to invest abroad vary by sector and the relationship between FDI inflows and sectoral performance may differ from one for the overall economy. The purpose of the study therefore, was to investigate the determinants of FDI inflows and its relationships with economic performance using sector specific approach. The study provides a scientific knowledge on determinants of FDI inflows and its relationship with economic performance using sector specific approach and to policy makers to maximize FDI inflows in key economic sectors in Kenya. Analysis of the relationship was important in determination of the net effects of FDI inflows at sectoral level. The study established that DEDSGDP, inflation, performance in manufacturing and services were significant in influencing FDI inflows in Kenya.