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Foreign Direct Investment, Firm-Level Capabilities and Human Capital Development: Evidence from Kenyan Manufacturing Industry

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  • Gachino, Geoffrey

    (United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology)

Abstract

This paper uses firm-level survey data of Kenyan manufacturing industry to examine the significance of FDI and firm-level capabilities in human capital development. It undertakes a detailed descriptive comparison of human capital and other firm-level capabilities generated by both foreign and locally owned firms. The analysis shows that foreign firms generally enjoyed high human capital development and firm-level capabilities than locally owned firms. Empirical evaluation of human capital determinants revealed a statistically significant role played by FDI in determining human capital development in all the firms. Other factors which demonstrated an equally significant role included specific firm level capabilities; process, product, marketing and export performance. Interestingly, basic infrastructure, systemic embeddedness, firm size, labour market conditions and the role of government were not statistically significant, implying their weak role in human capital stimulation. The choice of Kenyan manufacturing industry presents an ideal case to evaluate FDI, firm-level capabilities and human capital development for two main reasons. First, the Kenyan economy has continued to witness low levels of economic growth despite having literally lifted most industrial controls and protections since introduction of structural adjustment programme from mid 1980s. Second, although Kenya has low levels of FDI in general terms it has high levels of foreign presence in selected industries. The Kenyan case is therefore expected to offer important policy ramifications for other countries in the sub Saharan region.

Suggested Citation

  • Gachino, Geoffrey, 2006. "Foreign Direct Investment, Firm-Level Capabilities and Human Capital Development: Evidence from Kenyan Manufacturing Industry," MERIT Working Papers 2006-014, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2006014
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    References listed on IDEAS

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    Cited by:

    1. Gachino, Geoffrey, 2007. "Foreign direct investment and firm level productivity - A panel data analysis," MERIT Working Papers 2007-016, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).

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    More about this item

    Keywords

    FDI; human capital; human development; firm-level capabilities; systemic embeddedness; infrastructure; Kenya;
    All these keywords.

    JEL classification:

    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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