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FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry

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  • Fukunishi, Takahiro

Abstract

FDI in the garment sector has been the single case of large-scale manufacturinginvestment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.

Suggested Citation

  • Fukunishi, Takahiro, 2010. "FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry," IDE Discussion Papers 232, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper232
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    Cited by:

    1. Chakraborty, Debashis & Mukherjee, Jaydeep & Lee, Jaewook, 2016. "Do FDI Inflows influence Merchandise Exports? Causality Analysis on India over 1991-2016," MPRA Paper 74851, University Library of Munich, Germany.
    2. Chakraborty Debashis & Mukherjee Jaydeep & Lee Jaewook, 2017. "FDI Inflows Influence Merchandise Exports? Causality Analysis for India over 1991-2016 : Causality Analysis for India Over 1991–2016," Global Economy Journal, De Gruyter, vol. 17(3), pages 1-10, September.

    More about this item

    Keywords

    Textile industry; Foreign investments; Exports; Manufacturing exports; FDI spillover; Sub-Saharan Africa; Kenya;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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