Abstract

Foreign direct investment and technological spillovers are among the most widely studied to understand their
role in learning, capability building and innovation management. The purpose of this paper is to examine the role
of FDI in industrial development in the sub Saharan region but using an alternative framework taking Kenya as a
case study country. Specifically, the paper investigates whether presence of FDI in manufacturing industry
stimulates spillover occurrence. This is done following a unique analytical framework developed taking into
consideration human resource development, linkages, competition and demonstration effects. On the basis of this
framework, foreign presence stimulated spillover occurrence in Kenya’s industry. There was tremendous
evidence of learning, capability building and innovation due to spillover occurrence. The main limitation of this
paper is that results obtained cannot be generalized since the five foreign firms studied cannot be considered
comprehensive representatives of the entire manufacturing industry. The results need to change our thinking with
regard to policy pertaining to the role FDI plays in a host country’s industrial development. This paper presents
the only known work based in Africa focusing on FDI, spillovers, learning, capability building and innovation.
The case studies, though ambitious, present findings which need to change our thinking about the past results
and methodologies of the past studies on FDI and spillovers.

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