Role of foreign direct investment on technology transfer and economic growth in Kenya: a case of the energy sector

Foreign firms in Kenya have played a major role in enhancing economic growth in the agriculture sector, especially in floriculture and horticulture. Over a long period of time, foreign direct investment (FDI) has been found to create many externalities in the Kenyan economy in the form of benefits available through transfers of general knowledge, specific technologies in production and distribution, industrial upgrading, work experience for the labor force and the establishment of finance-related and trading networks, and the upgrading of telecommunications services. The purpose of this study was to address the role of foreign direct investment on technology transfer and economic growth in Kenya, with a focus on the energy sector in Nairobi focusing on the period between 2001 and 2014. This study adopted a descriptive and inferential survey design. The target population for this study was 60 senior managers composing of directors and managers from Kenya Power and Kengen. Questionnaires were used to collect primary data. The study established that there is a relationship between foreign direct investment variables of infrastructure, technology diffusion, trade facilitation, knowledge management, and technology transfer and economic growth. The study found that investment in the energy sector has led to new technology in the country as it has transferred technology to local investors through sharing of knowledge in new innovation in production, research, and development and also has led to increased competition in trading which has resulted in efficiency and effectiveness of the industry. A major implication of this study is that policy makers must devise policies that would create an enabling environment for attracting FDIs in order to facilitate technology transfer and hence economic growth. © 2016, The Author(s).