A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF ARTS IN ECONOMICS OF THE UNIVERSITY OF NAIROBI

IMPACT OF ECONOMIC GLOBALIZATION ON ECONOMIC GROWTH IN
KENYA (1980-2017).
BY
JOSPHAT KAGIRI MACHAGUA.
X50/85317/2016.
MASTER OF ARTS ECONOMICS.
.
A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR THE AWARD OF THE DEGREE OF MASTER OF ARTS IN
ECONOMICS OF THE UNIVERSITY OF NAIROBI.
2018.

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DECLARATION
This research project is my original work and has not been presented for any degree award in
any institution.
Signature………………………………….. Date……………………………………………..
JOSPHAT KAGIRI MACHAGUA.
M.A Economics.
X50/85317/2016.
SUPERVISOR’S DECLARATION.
This research project has been submitted for examination with my approval as the university
supervisor.
Signature……………………………….……… Date……………………...............................
Dr Thomas Ongoro School of Economics University of Nairobi.

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DEDICATION
This project is dedicated to my parents Ann Waihuini Munene and the late Joseph Kagiri
Machagua, my siblings Dennis Machagua, Leah Machagua, my auntie Mary Mukami
Munene and uncle Francis Munene for the effort they have put into ensuring I succeed in life.

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ACKNOWLEDGEMENT
The assistance accorded to me by my supervisor and family has been pivotal in steering me
through. I would like to extend my sincere thanks to all of them. I am highly indebted to Dr
Ongoro. His guidance and constant supervision have assisted me in a great way. In addition to
his help has been indispensable and instrumental in ensuring that I complete this project. My
gratitude also extends to my parents, siblings and classmates for the regular follow up on my
progress as far as completion of this project is concerned.

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ABSTRACT
Economic globalization has contributed immensely to economic growth and production
efficiencies across the globe. However, the consequences depend on the nature and the manner
in which different nations are integrated into the international market. There are many
components of globalization that affect economic growth. However, this paper examined the
impact of the major components of economic globalization: FDI, that is International Trade,
International Portfolio Investment, International Technological Transfer and International
Remittance on GDP growth in Kenya. The study’s objective was to assess the macroeconomic
impact of economic globalization on the Kenyan economy. To achieve the desired objective,
the study employed ARDL econometric estimation techniques using annualised secondary time
series data from UNCTAD, and World Bank in Kenya from 1980-2017. The results indicate
that Foreign Direct Investment, Portfolio Investment and International technological transfer
have a positive and significant impact on economic growth in Kenya. However, Foreign Trade
and International remittances were found to have a negative and impact on economic growth.
In order to better harness the positive impacts of economic globalization, policies that boost
International Trade, Foreign Direct Investment, Portfolio Investment, International
Technological Transfer and International Remittances are encouraged in order to facilitate
economic growth in Kenya.

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ACRONYMS AND ABBREVIATIONS
ADD- Anti-Dumping Duties.
ADF- Augmented Dickey-Fuller.
ARDL- Autoregressive-Distributed Lag.
CBK- Central Bank of Kenya.
CVD- Countervailing Duties.
DC- Developing Countries.
FDI- Foreign Direct Investment.
FTRD- Foreign Trade.
GDP- Gross Domestic Product.
ILO- International Labor Organization.
IPR- Intellectual Property Rights.
ITT- International Technological Transfer.
MNE- Multinational Enterprises.
MDGs- Millennium Development Goals.
OLS- Ordinary Least Squares.
PTInv- Portfolio Investment.
R&D- Research and Development.
SSA- Sub-Saharan Africa.
UNCTAD- The United Nations Conference on Trade and
Development.
UNDP- United Nations Development Programme.
WTO- World Trade Organization.
EU- European Union.

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BIC- Bayesian Information Criterion.

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LIST OF FIGURES
Figure 1: Kenya's Foreign Trade (M+X).............................................................................11
Figure 2 : FDI Inward and Outward flows .........................................................................15
Figure 3: Portfolio Equity Net inflows.................................................................................18
Figure 4: Patent application, non-residents in Kenya........................................................19
Figure 5: Annual Remittances Received..............................................................................21

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LIST OF TABLES
Table 1: Variable Description and Expected Sign..............................................................28
Table 2: Descriptive Statistics Summary.............................................................................32
Table 3: Normality Test: Shapiro Wilk Test.......................................................................33
Table 4:ADF Stationarity Test. ............................................................................................33
Table 5: Lags Selection Criteria. ..........................................................................................34
Table 6: Cointegration Test ..................................................................................................35
Table 7: ARDL Estimates .....................................................................................................37

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TABLE OF CONTENTS
DECLARATION......................................................................................................................ii
DEDICATION........................................................................................................................ iii
ACKNOWLEDGEMENT......................................................................................................iv
ABSTRACT..............................................................................................................................v
ACRONYMS AND ABBREVIATIONS...............................................................................vi
LIST OF FIGURES............................................................................................................. viii
LIST OF TABLES..................................................................................................................ix
TABLE OF CONTENTS ........................................................................................................x
CHAPTER ONE: INTRODUCTION....................................................................................1
1.1. Background to the sturdy.........................................................................................1
1.2. Dimensions of globalization......................................................................................2
1.2.1 Globalization of technology...............................................................................3
1.2.2 Globalization of production ..............................................................................3
1.3. Globalization Enablers. ............................................................................................5
1.4. Roles within the globalized economy.......................................................................6
1.5. Significant forces contributing to the globalization process..................................6
1.6. Problem Statement....................................................................................................7
1.7. Research Questions ...................................................................................................8
1.8. Research objectives ...................................................................................................8
1.8.1 Main objective....................................................................................................8

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1.8.2 Specific objectives ..............................................................................................8
1.9. The Significance of the Study...................................................................................9
1.10. Organization of the study......................................................................................9
CHAPTER TWO: LITERATURE REVIEW.....................................................................10
2.1 Introduction.............................................................................................................10
2.2 Theoretical Literature Review ...............................................................................10
2.2.1 Trade Theories. ................................................................................................10
2.2.2 Foreign Direct Investment Theories...............................................................14
2.2.3 Portfolio Investment theories..........................................................................17
2.2.4 International Technological Transfer............................................................18
2.2.5 Migrant Remittances. ......................................................................................20
2.3 Empirical Literature...............................................................................................23
2.4 Overview of the Literature.....................................................................................25
CHAPTER THREE: METHODOLOGY ...........................................................................27
3.1 Introduction.............................................................................................................27
3.2 Theoretical Framework..........................................................................................27
3.3 Empirical Model......................................................................................................27
3.4 Variables definitions and expected sign. ...............................................................28
3.4.1 Estimation Techniques. ...................................................................................29
3.5 Diagnostic tests. .......................................................................................................29
3.5.1 Normality test...................................................................................................29

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3.5.2 Unit root tests. ..................................................................................................30
3.5.3 Augmented Dickey-Fuller Test.......................Error! Bookmark not defined.
3.5.4 Test for Structural Breaks Presence. .............................................................30
3.5.5 Cointegration Test. ..........................................................................................30
3.6 Data, data types and Sources. ................................................................................30
CHAPTER FOUR: ................................................................................................................32
MODEL ESTIMATION, EMPIRICAL FINDINGS AND DISCUSSION. .....................32
4.1 Introduction.............................................................................................................32
4.2 Descriptive Statistics Summary. ............................................................................32
4.3 Stationarity Test......................................................................................................33
4.4 Lags Selection Criteria............................................................................................34
4.5 Cointegration Test...................................................................................................35
4.6 Results summary. ....................................................................................................37
CHAPTER FIVE ...................................................................................................................39
CONCLUSION AND POLICY RECOMMENDATIONS ............................................39
5.1 Introduction.............................................................................................................39
5.2 Summary and Conclusions.....................................................................................39
5.3 Policy Recommendations........................................................................................40
5.4 Limitations of the Study. ........................................................................................42
5.5 Suggestions for Further Research. ........................................................................42
REFERENCES.......................................................................................................................43

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APPENDIX.................................................................................Error! Bookmark not defined.

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CHAPTER ONE: INTRODUCTION
1.1. Background to the sturdy
Globalization process has immensely transformed the way the economic world operates.
Intriligator (2003) posits that it is a significant force that determines the globe’s future. Also
(Akinboye, 2008) states that it is a dominant force at present. The communication and trade
barriers that once hindered integration in the world have diminished. In today’s integrated
world, no nation can exist in a state of autarky (Zhuang & Koo, 2007). With the FDI,
remittances and international technology inflows, unprecedented global integration,
independence, internet linkage in all corners of the globe and increased international trade, we
live in a globally interconnected village. Globalization has become ingrained in all fields:
government, business, economic, social and political. Half a century ago, a plethora of
literature on globalization emerged. Within this research, there was a lack of a consensus on
the definition of globalization, how different it is from the other times in economic history and
when it all started and the nature of its impact. In generally, globalization commonly refers to
the flow of capital, people or knowledge and products.
The second most common globalization theme is that of space and time. It is a consequence of
an improvement in communication and technology that facilitates the rapid exchange of
information. The third industrial revolution was facilitated by an incredible increase in
productivity, improvement in transportation speed, technological developments. The ease of
communication assisted in labor, capital, products, technology and information movement
intensity between nations. As a result of integration, global economic movements are getting
complicated (Ekodiyalog, 2012).
Globalisation is multifaceted. It encompasses politics, sociology, and economic dimensions.
This study will primarily focus on the economic dimension of globalization. It majorly
includes foreign trade, FDI, International Portfolio Investments, International technological
transfer, and foreign remittances. This chapter starts by defining and highlighting the
dimensions of globalization. Then enablers of globalization will be examined and discussed
and lastly the key roles and the players presented.
Most definitions of globalization frequently refer to integration, openness or flows of goods
and services. Integration refers to an amalgamation of elements across countries. These
elements predominantly occur through an international division of production and cross-border
activities while openness pertains to the nations’ willingness to participate or engage in the

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international economic activity. Meanwhile flows encompasses movement of services and
goods through trade, investment, the foreign exchange markets and other financial transaction
in addition to the sharing of idea, technology and intellectual property (Gundlach &
Nunnenkamp, 1996).
Globalization encompasses increased interaction and advancement among the nations.
Globalization is facilitated by progressive skills advancement, communication, locomotion,
knowledge, military, political powers in addition to the interfacing cultural practices and value
systems. It is not a self-determining process but an economic, cultural and socio-political
permeation process. Globalization is also facilitated by private corporation’s policies,
governments, civil society entities, and international agencies, Kobrin, S. J. (2009).
Globalization seeks the enhancement of a nation’s economic, ideological, technological,
military and political power and influence for competitive advancement and domination of the
world (Nsibambi, 2001). International trade, foreign remittances, and investment drive this
process aided by international technological transfer. Mandle (2003) discusses the costs/
benefits analysis of globalization at length. He attacks the antiglobalization movement by
refuting the false notions that are associated with significant criticism of the globalization
process. He argues that globalization accentuates economic growth which is necessary for
poverty reduction. Therefore, globalization promotion should take precedence because it
reduces poverty. Also, according to (Noguer & Siscart, 2005; Frankel & Romer, 1999; and
Irwin & Tervio, 2002) it promotes growth of income. Furthermore, it has tremendous impact
on our cultural development. In addition to that, it also affects the human well-being across the
globe.
1.2. Dimensions of globalization
There are three globalization dimensions; economic, social and political. Though
interdependent, political and economic forces are the driving factors. Social changes occur as
a result of those two. The social dimension encapsulates globalization and its impact on the
interactions in the society. These include the working conditions, social welfare, employment
opportunities, and living standards. The social dimension majorly encompasses cohesiveness,
the exclusion or inclusion, of culture, security, and identity beyond the world of work (ILO,
2003).
Political globalization encompasses governmental actions on a global level. It is when the
welfare and freedom of citizens are acted upon by the present governance systems in place.

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Legislative global integration schemes such as the WTO, EU, World Bank & IMF is where
political policies are made. The economic aspect of globalization refers to increasing cross-
border trade, capital flows, the interdependence of the global economies and technological
transfer. It reflects the mutual integration and expansion of the market frontiers. This is an
irreversible economic development trend (Gao, 2000).
The current globalization wave is driven by policies that open economies to international
markets. Since World War II, many nations have adopted a free-market system, increasing their
productive capacity by creating new opportunities for international markets and reducing trade
barriers. In addition to that, these nations have already established international trade
agreements in the promotion of the same. International companies also construct foreign firms
and establish market systems with their counterparts across the globe. Therefore, an
international financial and industrial business structure is the defining feature of economic
globalization. The significant economic components of globalization include the globalization
of technology, production, markets, finance, and investment.
1.2.1 Globalization of technology
Technology has always been a significant driver of the globalization process. Technological
advances have drastically transformed our living standards. It has granted individual economic
factors such as the investors, the consumer’s businesses men valuable tools that have enabled
them to identify and pursue commercial opportunities. Technology has also accentuated the
economic trends analyses speeds around the world, a secure economic assets transfers, and
simplifies the collaboration with far-flung partners.
1.2.2 Globalization of The production Systems
The literature on globalization main area of focus has been the impact on developing countries
(DC’s). However, alternative perspectives do exist, but there is no concise and apparent
consensus on the nature of the effect. According to the existing literature, three key themes
emerge. That globalization has by-passed, been detrimental and has made a positive
contribution in the least developed nations.
The first theme to emerge from globalization is that the globalization process has bypassed the
least developed nations. The major arguments in is that most developing nations cannot
harness the benefits of globalization due to the structural and institutional challenges inherent
within these nations. These nations cannot meet the global demand by international economies.

4
They are in a disadvantaged position due to their limited infrastructure and inaccessible
geography. Also human resource and capital inadequacy that mean that these countries cannot
adopt the latest production trends. This means that these nations do not see an influx of trade
and investment. At times decline in global trade has been witnessed due to lack of competitive
advantage that comes with advanced infrastructure that comes from capital investment
deepening (UNCTAD, 2002a).
The second globalization theme states that most DCs are in a disadvantaged position in the
globalization process. As a result of a narrow focus on mainly raw unattractive products
exports, most DCs have been unable to harness the advantages that come with global (Porter,
1990). Many products emanating from the African region are of low quality and experience
severe price volatility, low growth prospects and are not in high demand globally (UNCTAD
2002b). Another critical argument is the application of inferior and unsuitable technologies in
the production process and deterioration in the environmental and labour standard (Baker et
al., 1998; Chussodovsky, 1997; Cole, 2000; Crotty et al., 1998; Goldsmith E., 1996; Hamilton
& Clements, 1999; Khor, 1996; Nayyar, 2001; Obstfeld, 1998).
The third globalization theme is that the process has immensely benefited DC’s. Globalization
enhances access to cutting-edge technology, latest production techniques, managerial practices,
and capital. In addition to that, it creates employment opportunities for youths in developing
nations (Gundlach & Nunnenkamp, 1998). Significant arguments supporting this theme argue
that trends associated with increased integration such as a breakdown in value chains accord
DCs rare opportunities to enhance their productive capacity in cheap labor industries which
they have a comparative advantage in.
Furthermore, the international integration enables these countries to participate in international
trade. Hence they can raise their national income, earn income from exports, attract FDI and
develop their manufacturing sectors, a critical step to the developed world status (Arndt, 1999).
Most of the arguments from the existing literature that the globalization process has been
beneficial for DCs originate from the classical and neoclassical theory. The proponents of the
themes that the globalization process has bypassed or has been detrimental to DCs like Prebisch
(1950) and Singer (1950) recognize and acknowledge the importance and benefits of trade in
enhancing economic growth. (Hirst & Thompson 1996; Hoogvelt 1997) Acknowledged trade
benefits to developing nations. They argued that globalization benefits have not been extended

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to the DCs due to lack of comparative advantage, poor infrastructure, and human resource
development
1.3. Globalization Enablers.
Globalization enablers in the international economy enhance the increased integration levels
among countries. They reduce trade barriers and time of the trade. These factors are;
technological advancement, political goodwill, global international organizations, i.e., WTO
and financial markets development.
New technologies enhance the ease of relocation of the production firms. This enables the
buyers to source for goods and services globally (Dunning, et al., 1998). According to
(Hoogvelt 1997& Sassen, 1996), infrastructure upgrades in communication and transportation
has diminished the perceptions of distance and time Innovations. The time taken and cost to
move products across the world have also gone down. Consumer markets have also improved
significantly as a result of developments in communication systems hence facilitating faster
sharing of knowledge (Naisbitt, 1994).
International institutions growth and shifts in global ideology, two crucial political steps
developments have immensely enabled the globalization process. According to (Oman, 1994;
Pieper & Taylor, 1998), cold war’s end and fall of communism accentuated the free market
and capitalism hence accentuating the spread of international private sector activities.
Simultaneously, international institutions i.e. The IMF are continuously growing in influence
contributing to enhancing integration levels across the globe.
In the periods that preceded the globalization process, trends towards deregulation were
evidenced across many countries. They encompassed foreign investment, trade liberalization,
and the financial markets. Trade barriers and tariffs fell after World War II. This was under the
auspices of GATT which encouraged trade among the global economies. Furthermore, most
economies entered into international and regional trading blocs to promote and facilitate
international trade. New financial market instruments financial markets liberalization, cutting-
edge technologies enabled significant cross-border financial flows and trade in DCs. This is as
opposed to the 1990s when protectionism, such as the non-tariff barriers to trade like
countervailing duties were on the increase in DCs.

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1.4. Roles within the globalized economy
Deregulation has accentuated the globalization process. Economic activity is being driven by
market forces. Multi-National Enterprises (MNEs), the primary drivers of globalization. They
own and control operations in many countries. They mostly control IIT, investments (FDI and
portfolio) and trade. These firms, which receive recognition similar to nations, are widely
recognized for their significant contribution to the global economy (Naisbitt, 1994 & Porter,
1990). According to Pieper & Taylor (1998) and Scholte (1996), international financial entities
and intermediaries also play a crucial role in the international economy. Critics such as (Chang,
1998) have pointed out on the state’s diminishing role in the globalization process while others
have pointed out the changing roles of the government (Cantwell, 1989; Porter, 1990).
Governments’ regulatory roles are diminishing in the global economic activities when
privatization and deregulation take centre stage. Also, the increasing number of international
financial transactions has reduced the central bank’s ability to manage exchange rates. This
reduces the governments’ influence and control over economic activities (Rodrik 1997). Most
governments use fiscal and monetary policies to influence and regulate economic activities in
a country. These policies affect the competitiveness of the local industries and influence
investment decisions by the MNEs. Despite the noted trends in the globalized world, the
governments have specific roles to play within the global economy. Such roles pertain to
creating a condusive and ebabling environment that accentuates innovation for private sector
to succeed via the promotion of industrial development, innovation, and trade. National
governments also play a critical role in fostering select industries (Cantwell 1989; Porter 1990).
Furthermore, according to (Ohmae, 1994) national governments should also enable access to
competitive products globally so that they can assist domestic firms to become internationally
competitive and attract FDI through the provision of infrastructure and appropriate economic
policies.
1.5. Significant forces contributing to the globalization process
Three essential factors have affected economic globalization. These are technological
improvement, individual and society tastes and public policies. Technological improvement in
communication and transport reduce the transaction costs. Secondly, tastes and preferences of
societies’ generally influence the demand-supply dynamics cost reduction via increased
integration. Thirdly, public policies significantly influenced economic integration pace (Musa,
2000). These forces are further broken down into the following facets.

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Significant forces have contributed to the globalization process. They include; Liberalization
of capital movements enhanced opening of international markets to trade and investments.
These forces spur international competition growth, communication, and technology pivotal
roles. Furthermore, they enhance international capital movements, organization of production
and transfer of technologies, development of broader and more sophisticated world network
structures through the adoption of strategies of mergers and acquisitions, network organizations
and cooperation agreements, increasing volume of international trade, FDI and general
international capital movements and increasing the liabilities and assets amount of each country
globally.
Furthermore, simultaneous competition in the global markets between the old and the new
competitors puts acquired positions at risk. It necessitates an extremely rapid structural
adjustment in the industries in numerous sectors. This increases the multilateral frameworks
numbers for international investments and trade, increasing the roles of intra-firm trade
significantly, MNE’s location strategies influenced by comparative advantage of the region
which also leads to product fragmentation, commercial foreign presence to assess and access
the markets concerning investment and trade and lastly the liberalization of capital movements.
1.6. Problem Statement
Since World War II the world has become increasingly globalized. Rapid progress of ITT in
international trade, financial transactions, and FDI has been observed in Africa (Pare, 2016).
Kenya is the economic gateway to East Africa. The nation has a relatively better infrastructure
in comparison to its East African neighbors. This places Kenya in a plum position to benefit
from increased interconnectedness globally via international flows of products, people,
services or knowledge. According to Rifkin, J. (2011), after the third industrial revolution,
transportation speed improvements, production increase, technological developments and
enhancements, and ease of communication assisted the movements in labor, capital,
technology, and information between nations besides products. It enhanced integration among
international economies as movements became more complicated (Ekodiyalog, 2012) hence
laying the first economic globalization foundations.
As integration in communication, transport and trade increases we are increasingly becoming
a global village. Institutions and state, therefore, cannot underplay the need to think and act
globally. Competition is already knocking at our doorstep, irrespective of our geographical
location (Aosa, 2006). Globalization, thus according to (Hill, 2005) holds a greater promise in

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empowering MNEs and nations. It enhances the creation of larger markets in the international
sphere, promotes linkages, partnerships and a higher international understanding.
According to Manda & Sen (2004), Kenya has been gradually integrating with the international
economies since the 1980s. Comprehensive literature on globalization trends and its impact on
growth in Kenya or any individual developing country in SSA is limited (Pare, 2016). In
addition to that, the existing literature explaining if there is any economic globalization impact
on Kenya’s economic growth in limited. It mainly focuses on specific globalization aspects to
a large extent i.e. FDI, Foreign trade, International Remittances. In addition to that, most of the
existing literature is mainly qualitative in nature and does not compact the impact of
globalization into a singular economic measure(s) of impact (Simpson, R. 2007; Gundlach, E.,
& Nunnenkamp, P. (1996). Precisely, a clear research gap exists that provides a holistic study
on the impact of globalization on Kenya’s economic growth. Based on the problems that the
research has identified in SSA and Kenya in particular, the study will aim at addressing the
following contentious questions
1.7. Research Questions
1. What is the impact of economic globalization on Kenya’s economic growth?
2. What policy recommendations can be drawn from the impact of economic
globalization on Kenya’s economic growth?
1.8. Research objectives
1.8.1 Main objective
The major objective is to investigate the impact of economic globalization on economic growth
in Kenya.
1.8.2 Specific objectives
This research will pursue the following specific objectives in order to attain the overall aim of
the study.
i. To establish the impact of economic globalization on Kenya’s economic growth.
ii. To draw policy recommendations based on the study findings.

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1.9. The Significance of the Study.
An increasing share of world’s GDP is either directly or indirectly linked to the economic
globalization aspect (Ouattara, 1997). Despite the significance of globalization as a subject
more specifically in developing nations, there is lack of comprehensive literature in Kenya and
Africa. The existing literature, mostly qualitative and generally focuses on specific issues i.e.
climate, trade and not the holistic implications or effects of the economic aspect of
globalization on the economy. It explores the implication of economic globalization. However,
it fails to come up with a single measure of impact (Simpson, 2007).
Therefore, this research will be significant in; Giving a clear explanation of the importance of
the economic aspect of globalization in accentuating economic growth.In addition to that it will
add to the existing body of knowledge on economic globalization by showcasing the impacts
economic globalization has on economic growth. Furthermore, it will assist the country on how
to maximize the potential of globalization in developing the society and suggest and make
recommendation that will be used as a guide for further studies on this project to any scholar
that will research a similar topic.
1.10. Organization of the study
After introduction, chapter two will examine theoretical and empirical literature on economic
globalization as well as an overview of the two. Chapter three will look at the methodology.

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CHAPTER TWO: LITERATURE REVIEW.
2.1 Introduction
Economic globalization refer to the capital markets liberalization, free labor movements,
deregulation and removal of trade restrictions i.e. quotas, tariffs and other non-tariff barriers
by the state (Shangquan G., 2000). The increasing integration and interaction and of societies
and economies across the globe have become a new world order aspect. Integration is an
influential force in determining the future global prospect. Globalization significantly affects
efficiency, competitiveness, and productivity of firms (Intriligator, 2002). It allows
dissemination of new ideas and technology to impoverished peoples in the least developed
nations. The barriers towards cross-border trade and international investment are tumbling.
Due to advancement in telecommunications and transportation technology across the globe,
the distance is shrinking. International economies are also integrating resulting in an
interdependent global economic system. Recent globalization period has been characterized by
mobile capital and labor, reduced trade barriers, fall in production costs, increased trade, and
access to new supply sources, stringent quality requirements, increased competition and rapid
technology transmission across the borders. This chapter, therefore, interrogates and reviews
the existing literature that explains the impact of the economic aspect of globalization in Kenya.
2.2 Theoretical Literature Review
The two major globalization components are foreign trade and FDI. These are the primary
drivers of globalization. The first section of this chapter will review the trade theories and their
relevance to the globalization process in the developing world. The second part of the chapter
will look at investment, remittance and technological theories are considered and the role of
MNEs in accentuating the globalization process.
2.2.1 Trade Theories.
Trade liberalization has become widespread particularly among developing and transition
economies over a half a century ago. On aggregate, merchandise trade value globally Increased
by over 7% per year (a four-fold volume increment) from 1980 to 2011 (WTO, 2013).
Furthermore, DCs global exports share increased from 34% in 1980 to 47% in 2011 (WTO,
2013). An open economy grows much faster than a closed one according to most economists
(Grossman & Helpman, 1991; Edwards, 1993). Also according to Dollar & Kraay (2004) trade

11
openness significantly contribute to economic growth. Trade openness, often quantified by
volume of trade, brings higher economic growth rates.
Furthermore, Freund & Bolaky (2008), opined that the openness of the economy positively
impacts the living standards and income per capita in flexible economies. The latest wave of
globalization is associated with foreign trade, FDI, portfolio investment, international
migration, and technological revolution because trade is a prerequisite for any economic
growth. International transactions facilitate diffusion of technology because of the importation
of high-tech products hence accentuating economic growth (Almeida & Fernandes, 2008;
Baldwin et al., 2008; Barro & Sala-i-Martin, 1997). In addition to that, trade also facilitates
economic integration. By increasing the market size, it allows economies to better capture the
economies of scale benefits (Alesina et al., 2005).
According to Grossman & Helpman (1991) in a theoretical model, they showed that openness
to trade facilitates technological progress, improves new technologies transfer and improves
productivity. These benefits are dependent on the economic openness degree. The liberalization
of trade also forces nations to reform its economic programs under pressure from global
competition, hence enhancing the growth of the economy (Rajan & Zingales, 2003; Sachs &
Warner, 1995;). Trade liberalization, therefore, in DCs is often implemented with an eye on
economic growth stimulation.
Figure 1: Kenya's Foreign Trade (M+X)

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Source: World Bank Development Indicators (1980-2017).
2.2.1.1 Trade theories
According to Marshall (1980), causes that determine economic progress and growth in any
nation usually belongs to international trade. Adam Smith (1778), in his theory of absolute
advantage stated that any economy engaging in foreign trade derive two distinct benefits. First,
the economy can trade its surplus for something it does not produce. In addition to that, labor
division is not hindered by the narrowness of the home market. Secondly, when economy
opens, a market for its surplus is created, encouraging improvements in its productive capacity.
This increases the society’s wealth. (Smith, 1939).
Trade benefits, according to Adam Smith, are first the exchange of commodities in surplus for
anything of value. Second, we can get products from international markets that we are unable
to produce. The specific benefits of trade enable different countries to trade their gluts with
each other. In addition to that, trade widens the market for products, enabling the countries to
specialize their resources on what they are most efficient and have an absolute advantage at
producing. This theory is known as the absolute advantage theory.
David Ricardo (1817), expanded on the initial absolute advantage theory. He proposed that
countries could benefit from relative efficiency trade. Specifically, countries should
concentrate on producing what they have a relative advantage on and trade its glut with other
nations for other commodities that other nations have relative advantage of. David Ricardo’s
theory is known as the comparative advantage theory. This theory proposes that higher output
levels can be attained by nations specializing in areas they produce relatively cheaper and best.
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5,000
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15,000
20,000
25,000
30,000
35,000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
US
$,
Millions
Year.
Foreign Trade (sum of M+X) annual in US Dollars
at current prices in millions).

13
Heckscher and Ohlin (1991) came up with the Heckscher-Ohlin model. The model states that
trade patterns are determined by factor endowment differences. It evaluates trade equilibrium
between two countries with varying natural resources and specialties. The model emphasizes
on a country exporting product that it has in abundance and import products that it cannot
produce efficiently.
Heckscher and Ohlin (1991) developed the Heckscher-Ohlin theorem. The theorem is an
improvement on Richardian’s comparative advantage theorem. The Ricardian theory of
comparative advantage did not explain the productivity differences that cause inter-country
comparative costs variations as a result of difference in factor endowments amongst nations.
The theory further elaborates that countries should focus on exporting what they can produce
in plentifully and efficiently. International trade benefits are realised when each nation puts
exports resources that are naturally abundant in the local economy and imports the resources
that the country naturally lacks. In this theory a country's productivity advantage comes about
as a result of its relative abundance in production factors.
Stolper & Samuelson (1941) developed the Stolper –Samuelson theorem. It describes how
relative prices of outputs and the relative factor rewards are related. In particular, the real return
on capital and wages. The theory suggests that, an increase in relative price of labor intensive
goods will make labor to be better off while at the same time capital will be made worse-off,
vice-versa, as long both Labor and capital-intensive goods are in production.
Paul Samuelson (1992) suggested that trade openness leads to factor-price equalization across
nations. Specifically, he predicted that free trade reduces the price disparity of production
factors among nations. MNEs are also dominant players in the global economy. They have
significantly influence trade patterns across the globe. They bring many benefits like as
technology, employment, knowledge, and skills. Furthermore, countries participate in trading
blocs to attain influence and power in trade negotiations.
Tadeusz Rybczynski (1955) developed the Rybczynski theorem .The theory states that if some
resource endowment increases, the industries that use the resource intensively will increase
their output while the other industries outputs will be in decline i.e. in an industry comprises
of only two factor imputs labor and capital and produces cloth and steel. Cloth is labor
intensive while steel is capital intensive. If capital endowment rises, capital constraint shifts
outwards, causing steel production to increase and clothing production to decrease. According
to this theory, when full employment is attained, changes in endowment affects the output of

14
goods. The theorem is useful in the analysis of the effects of immigration, emigration and
capital investment.
Krugman et al., (1989) invented new trade theory. It posits that economies of scale and network
effects in key industries are crucial factors in the determination of trade patterns. The network
effects of these factors van be significant such that they outweigh the advantages of the more
traditional theory of comparative advantage. The Ricardian model left out critical comparative
advantage determinants such as factor proportions and geography outside its model. The new
trade theory brings these comparative advantage determinants into the model. Also the theory
states that early entrant firms have an advantage in that they can becoming the dominant force
in the market as a result substantial economy of scale they gain that the new firms cannot
compete against.
According to Lewis (1955) trade stimulates the growth of the economy in various ways, such
as specialization. Trade benefits, according to Lewis, is the introduction of new products to the
economy which stimulates the desire to work to obtain these commodities. This desire for new
products accentuates productivity. Furthermore, trade generates new ideas on social
relationships, consumption pattern, and techniques.
Harberler (1959) opined that international trade has substantially contributed to the
development of DCs for over two centuries. Trade contributes significantly to the productive
capacity of DC’s by providing means of economic development such as capital, knowledge,
technical know-how, and skills. It also promotes competition and efficient resource allocation.
2.2.2 Foreign Direct Investment Theories
M any Developing nations have started giving preference to FDI. This is in a bid to pursue
economic growth as they lack adequate capital on their own. FDI and portfolio investment
provides additional capital that can accentuate development in these nations.
Growth in FDI and International Portfolio investment has been one of the major components
of economic globalization. Baliamoune (2002; 2007) explored the effects of FDI, and trade
openness on the growth of the economy in SSA. She found out that FDI significantly positively
impacts economic growth in SSA. According to Aliber (1970), FDI emerged after World War
II. Before, investment was mainly portfolio. In portfolio investment, the investor does not have
a direct level of involvement in the investment whereas in FDI the investor has direct control

15
over the investment and assets. Portfolio investments are inclusive of debt securities and equity
securities. They in form of instruments of the money markets.
Source: World Bank Development Indicators (1980-2017)
Both International Portfolio Investment and FDI improve the general productivity levels. They
also promote the degree of competitiveness in the host nation products at the international
markets. They also assist in the cost-effective technological transfer. These investments which
are transferred through MNEs close the technological gap in developing nations via direct and
indirect technical transfer (World Development Report, 2011). This is especially so in
economies that have financial markets that re well developed (Alfaro et al., 2003)
Figure 2 : FDI Inward and Outward flows
Source: World Bank Development Indicators (1980-2017)
2.2.2.1 Vernon Product Life Cycle Theory
The theory was invented by Raymond Vernon’s. It explains FDI patterns over time, suggesting
that MNEs undertake foreign investments at particular stages of a products life Vernon (1966;
1992). The theory emphasizes more on innovation timing, ignorance and uncertainty and the
scale of economic effects in influencing the trade patterns. A significant gap exists between the
knowledge of scientific principles according to Vernon. Many products globally go through
four life cycles: innovation, which is followed by growth, maturity, and lastly the decline. In
the first stage, the host nation has cutting-edge technology, a large market and comparative
advantage on a particular product which it primarily exports to other countries. As income and
-
200
400
600
800
1,000
1,200
1,400
1,600
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
US
$,
Millions.
Year.
FDI (Inward and outward flows) annual in US
Dollars at current prices in millions

16
product familiarity with foreign nations increase, their market and comparative advantage
surpass the host nation. This makes the host nation to start a shop in the foreign nations in order
to produce this product at a relatively lower cost in the second stage. When the foreign markets
increase due to economies of scale, production costs also decline in the third stage. This is due
to the low labor cost. Thus, foreign goods start competing with products from the host nation.
Moreover, due to their lower production costs in the third stage, they take over the market share
of the host nations firms. When the foreign manufacturer reaches mass production, his costs
decline further, and he can outdo the host nation’s products. Eventually, imports competition
begins in the fourth stage as the host nation’s exports take a tumble. Vernon posits that MNEs
set up manufacturing facilities abroad when maturity stage is attained at home country. Such
firms shift their investments to developing nations when production cost becomes a
competitive edge.
2.2.2.2 Ownership Advantage Theory
Large MNEs have already established brand names and competitive advantage regarding
technology domestically. This theory states that these firms, already having the competitive
edge domestically over small firms, they extend their operations, competitive advantage, and
market share to foreign markets via FDI. The major hurdle in this theory is that it fails to explain
why firms only choose to enter the foreign markets via FDI only whereas there are other
avenues such as franchising or licensing its technological know-how to foreign firms at a cost
etc.
2.2.2.3 Internationalization theory.
Buckley & Casson (1976; 2010) came up with the theory. It was later expounded by Hennart
(1986) and Casson (1983). Transnational firms according to Buckley & Carson, organize their
internal activities in order to gain firm-specific advantages for exploitation. The ownership
advantage theory states that MNEs enter the foreign markets to exploit the ownership
advantages that they possess. According to Internalization theory, international firms enter
foreign markets via various means like franchising, licensing exporting, etc. They enter into a
contract with foreign firms in the target market. The target firms have to negotiate, monitor and
enforce the contract which involves a transaction cost incurred by the recipient firm(s).
Hennart, (1982) initiated the idea of Internationalisation from two types of integration; vertical
and horizontal. Hymer (1976), showcases that if MNEs firm-specific advantages outweighs

17
relative operations costs abroad, FDI will take place. Hymer (1976) identified two major FDI
determinants; competition removal and the specific activity advantages of the firm.
According to Internalization theory, high monitoring, contract & negotiating costs with a
second firm force production to be internalized within the MNEs. When the operations cost are
low, these firms will contract foreign firms and internalize by either franchising their business
operations or licensing the brand names.
2.2.2.4 Dunning’s Eclectic Framework Theory.
Dunning’s incorporates in his theory why production should take place abroad. He combines
the internalization and ownership advantage to form a unified FDI theory. According to him,
investment only occurs when three conditions are satisfied. The firm one is that MNEs must
own a unique competitive advantage which overcomes disadvantages as a result of competing
with foreign firms at their home turfs. It may come in the form of ownership or proprietary
technology, brand name, economies of scale and so forth.
Second is ownership advantage. Ownership advantages include various ownership rights and
proprietary information that a firm may hold in important consideration, i.e., copyright,
branding, patent rights or trademark and unique management skills. Most of these ownership
advantages are intangible in nature.
Internalization advantages is the third factor considered. Sometimes, it is cost-effective for the
MNE to operate from a different places but retain the work performance internally.
Alternatively, the firm can outsource production, which involves negotiation and contracts with
local producer firms. This is an option only when the local firm in consideration can effectively
meet the production needs at a lower cost than the MNE.
2.2.3 Portfolio Investment theories
2.2.3.1 Modern Portfolio Theory
Harry Markowitz (1952) came up with the theory. The assumption of the theory is the risk
averseness of investors. That given two portfolios that offering similar expected returns, most
investors would prefer the less risky one According to him, given a particular market risk level,
most risk-averse investors will come up with a portfolio that maximizes their expected returns.
Markowitz (1959) opines that by investing in multiple stocks, investors enjoy diversification

18
benefits. In particularly the tanking of the riskiness of the portfolios that they invests in. An
asset's and returns and risks should not be assessed separately. They should be assessed but by
how much they contribute to the overall risk- return portfolio. The theory employs asset prices
variances as a proxy for risk(s).
Figure 3: Portfolio Equity Net inflows
2.2.4 International Technological Transfer.
International technology plays a significant role in social welfare and economic development
(Blalock & Gertler 2008,). Nelson (2008) and Solow (1956) stated the economic performance
of a country is a function of technological progress, innovation or just knowledge. According
to the existing literature on ITT, there are two parties involved in the technological transfer,
the owner of the technology and the recipient. The technology is transferred either via licensing
another firm to use it, subsidiaries in recipient nation or the sale of the technology to a firm in
recipient nation.
(200.00)
-
200.00
400.00
600.00
800.00
1,000.00
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
net
inflows
in
US
$,
millions
Years.
Portfolio equity, net inflows (BoP, current US$) in
millions.

19
Figure 4: Patent application, non-residents in Kenya
Innovation generates new and modern solutions to economic challenges, creates new products
and enhances resource allocation efficiency. Innovation and technology are critical competitive
strength sources for many firms and countries globally. The emergence of modern, cutting-
edge technologies has enabled and accentuated the globalization factor. Economic growth is a
result of either accumulation of production factors or technological advancement or both. As a
result, technology has been trickling in from developed nations to developing nations through
the MNEs. This fosters economic growth by reducing operating costs and boosting productivity
hence increasing economic growth in developing nations.
The technological transfer is significantly substantial in technologically advanced sectors
(Xiaolan, Pietrobelli, Soete, 2011, p. 1206). This technology is transferred through three main
channels to the developing nation’s namely; Trade in goods, licensing and direct investment.
New technology enables a DC to alleviate poverty through job creation and increase its exports
as according to (Keller, 2004, p.752). Technologies brought about by FDI contribute to the
lion’s share of economic growth in developing nations.
0
20
40
60
80
100
120
140
160
180
No.
of
patents
YEARS
Patent applications, nonresidents in Kenya.

20
Most of the Sub-Saharan nation’s that seek to enter the global markets are already behind
regarding technological advancement. This means that they must acquire new cutting-edge
technologies to grow economically and alleviate poverty. Technology is essential to a
developing country because it improves the welfare of the citizens, promotes trade and
productivity enhances efficiency in communication which in turn boosts economic growth.
2.2.4.1 Internalization Theory and Technological Transfer.
The theory was conceptualized by Buckley & Casson (1976). It highlights the role of MNEs in
technological transfers (Rugman, 1981). It recommends that MNEs should establish
subsidiaries abroad in order to capitalize on its cutting-edge technologies if it encounters
intellectual property rights challenges in order to protect its technological secrecy. This is
especially so if there are weak institutions in the recipient nation. Development of new cutting-
edge technology concentrated within the firm should be transferred to other facilities where it
is most needed. This occurs when a firm perceives that the benefits of hoarding new technology
exceed the costs hence firms prefer FDI to other forms of investment in order to safeguard
intellectual property rights.
MNEs are set up in a way that they are able to exploit and develop firm-specific advantages
(FSAs) in technology and knowledge. FSAs proprietary ownership assist in overcoming
knowledge externality as a public good. According to Rugman (1976) and (1979), MNEs do
enjoy a steady source of income stream when compared to firms of similar size domestically
when the industry effects such as technological progress are controlled.
2.2.5 Migrant Remittances.
Diaspora remittances immensely contribute to the recipient nations’ economic growth. They
have a positive, but marginal effect on the growth of the economy (Rao & Hassan, 2012). The
enormous sums involved have made it a vital component of globalization, especially to
developing nations. Migrants send remittances to their parent nation through different channels
namely MoneyGram, credit unions, banks, Western Union and other informal transfer
mechanisms. In the last two decades, migrant remittance surge has exceeded both foreign aid
and FDI in the developing nations.
Migrant remittances can foster economic growth in developing nations due to the significant
funds involved. They have become one of the primary sources of incomes sources in DC’s
based on their size and economic impact to the world.Migrant Remittances to DC’s and middle-

21
income countries attained US $ 466 billion in 2017 (World Bank Data, 2017). This was an 8.5
% increment from the US $ 429 billion in 2016. Remittances are also threefold when compared
with development aid in developing nations (World Bank Report, 2016). In addition to that,
remittances are more stable than any other capital inflow like FDI, portfolio Investment and
foreign aid in developing nations.
A general consensus exists depicting importance of the migrant’s remittances to economic the
growth in the recipient nations. When invested in government securities (treasury bills, bonds)
they provide significant external financing to the recipient nation, with Kenya as a classic
example. This funds also enhance development in infrastructure, education, health, tourism and
growth of real estate sectors. In addition to that, the funds also increase the foreign exchange
reserve and improve the livelihoods of the individual recipients by boosting their income.
The search for a better economic opportunity abroad is a significant driver in international
migration (Goldin et al., 2011; Pritchett, 2006; UNDP, 2009). Remuneration differential is one
of the significant determinants of the economic emigration aspect between the destination and
the source nation (Borjas, 1999; Harris & Todaro, 1970; Massey, 1999; Massey et al., 2002).
Other factors such as family networks, government policies, political stability, demography,
etc. play a pivotal role (Goldin et al., 2011). Many benefits accrue as a result of emigration
such as wages increment, brain circulation in diaspora network, and other spill over effects of
migrant remittances on poverty, education, local development (Pritchett, 2006).
Figure 5: Annual Remittances Received
Source: UNCTAD statistics (1980-2017).
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Remittances
recieved,
US
$
in
millions.
Year
REM-Annual Personal remittances received
(current US$ in millions).

22
2.2.5.1 Review of Theories on Remittances.
There is a large existing economic literature review on emigration determinants. Income
differential between the destination and the source nation plays a pivotal role (Harris & Todaro,
1970; Borjas, 1999 & Massey, 1993; 2002) .The primary determinant of emigration is the
differential in remuneration between the remittance destination and the source nation (Hicks,
1932). According to (Pritchett, 2006), the remuneration gap between the sending and recipient
nations can be as high as a factor of 10 to 1. The rate of emigration is also higher in countries
where the rates of poverty are extremely high, and social safety nets are non-existent. Migrant
remittances is explained by three theories stated below.
2.2.5.2 Pure Altruism theory.
This theory says that remittances occur because migrants are concerned with the welfare of the
family back home (Hagen-Zanker & Siegel, 2007; OECD, 2006; Vargas & Huang, 2006). The
international migrant is satisfied when only when the family’s welfare back home is has
improved, especially in harsh economic times (Vargas & Huang, 2006). According to this
theory, remittances are viewed as “compensatory transfers” .Since they increase in times of
economic disruptions i.e. Financial crisis in the immigrant’s home country. (Chami et al.,
2003:4; Vargas-Silva, 2008:292) states that international remittances are compensatory
transfers which increase when financial crisis accentuates in an immigrant’s home country
hence, they are countercyclical, in that they increase when economic conditions are
deteriorating in the business cycle.
Also, altruistic remittances are countercyclical to GDP growth patterns. They increase during
recessions to alleviate their suffering and smoothen their consumption and reduce during
economic booms (Orozco, 2009). Hence according to Brown (2006:63), an inverse relation
exists between the migrant remittance volume and economic conditions in the recipient nation.
Pure Self Interest theory.
The international remittances, are not in any way always countercyclical. At times they reduce
with deteriorating economic conditions in the recipient nation. According to Lucas & Stark
(1985; 904) individual’s self-interest can be another motive for international remittances by the
immigrants. They remit back at home to invest and return with dignity. Deteriorating economic
conditions accentuate reduction in remittances as the returns on investments, and other assets

23
reduce back home. So according to this theory migrant remittances depends on the economic
conditions back at home.
Tempered Altruism Theory.
According to this theory remittances are mutually benefits the immigrants and recipients back
home. (Lucas & Stark, 1985, p 904). This means that the migrant could be remitting money to
repay the family because of their investment in his/her education (Brown, 1997; Gubert, 2002).
Another reason could be increasing income uncertainty of the migrant's host nation (Amuedo-
Dorantes & Pozo, 2006). In addition to that migrants increase remittances when the recipients
are in a financial crisis or any other adverse income shocks (Lucas & Stark, 1985; Niimi et al.,
2009; Pleitez-Chavez, 2004).
2.3 Empirical Literature.
Some existing empirical literature has found a positive impact of economic globalization on
economic growth via factor productivity improvement, domestic resources effective allocation,
augmentation of capital and diffusion of technology diffusion. (Borensztein E et al., 1998;
Grossman & Helpman, 1991). Stiglitz (2003) posits that there exists a tremendous potential for
the developing nations in the globalization the world economies. Frederic Mishkin (2009) also
states that, economic globalization has lifted many people out of extreme poverty in the world
over the last century. Despite the numerous studies on economic globalization across the globe,
its impact in Kenya and SSA is still scarce.
Globalization brings economies in one market place by enhancing their productivity, exposure,
and specialization. It also avails new and improved technologies to nations that are in lack
(Shrestha, 2010). FDI is a vital capital formation source especially in LDCs where the base is
low. Furthermore, Addison & Movrotas, (2005) identify FDI as a significant external
development finance source for LDCs in achieving financial MDGs. The Kenyan economy has
been encouraging foreign trade and international investments deepening via openness,

24
introduction of foreign trade incentives and favourable policies to accelerate and boost
economic growth. Blomstrom & Kokko (1998) indicate the various investment incentives i.e.
tax reduction, tax holidays and market monopolies increase foreign trade, and which in turn
jack up economic growth.
According to Damijan et al. (2003) and Jefferson et al. (2002), FDI elicits international
technology spillovers, creates jobs, enhances a competitive environment for business
development and contributes to the global trade integration. This, in turn, contribute to
economic growth. FDI also increase productivity growth throughout the economy by availing
cutting-edge international technology to local firms Tekin (2012).
The literature review of inward investments in Greece, Taiwan, Greece, Mexico, and Indonesia
indicate a positive contribution of FDI which is significant in these countries’ growth. In
addition to that, the existing literature by Nyamwange (2009), Voorpijl (2011), Kinaro (2006),
Njeru (2013) and Musau (2011), shows how FDI impacts positively on economic growth in
Kenya). De Vita, G., & Kyaw, K. S. (2009) also found that DC’s have to attain a minimum
absorptive capacity and economic development level in order to better capture the growth-
enhancing impact of FDI and Portfolio Investment.
Remittance Inflows are also a significant share of the national income. Empirical literature
analysis indicates that they significantly determine the level of savings and investment and
savings. Remittances assist in improving the BOP by augmenting national savings in the least
developing nations. Remittances also enhance economic growth directly as they boost the
investments, savings, and consumption in addition to human and capital formation (Acosta et
al., 2007; Adams & Page, 2005). Nyamongo, E. et al (2012) also highlights how remittances
affect economic growth in a positive way in Kenya.
Rao and Hassan (2011) using the Solow growth model, explained the role of remittances on
economic growth. Remittances have enabled economies in DC’s i.e. Bangladesh and Nepal to
overcome severe credit crunch that is stems from external financing limitations and
underdeveloped financial systems (Giuliano & Ruiz-Arranz, 2009). Barajas A. et al. (2009;
2012) explained that international remittances are also likely to provide the catalyst for
monetary policy development and financial market enhancement and in developing countries.
The IMF and World Bank findings also indicate that international remittances indirectly boost
the rate of economic growth by reducing output volatility.

25
Following similar studies by Adhikary (2014), Borensztein et al. (1998) and Hoang et al.
(2010), the empirical specification of the study is derived from (Barro & Sala-i-Martin, 2004)
production function and Harrod neutral endogenous growth model .Taking into account the
variables of interest, this study will therefore, utilize foreign trade(FTRD), FDI, International
portfolio investment(PTInv), foreign remittances (REM) and international technological
transfer (IIT).
2.4 Overview of the Literature.
The nature and existence of economic globalization aspect and its impact on economic growth
has been the bane of contention in most SSA nations. This chapter establishes the economic
globalization major indicators, outlining the expected changes when a nation embraces
economic globalization in a bid to improve its economic growth. It exemplifies how the
economic aspect of globalization comprising of majorly foreign trade, FDI, international
Portfolio Investment, foreign remittances impact the economic growth of Kenya.
Existing theories review on economic globalization indicates that it impacts economic growth
in a positive way. Open economies, according to (Edwards 1993, 1364; Grossman & Helpman,
1991) grow more rapidly than their closed counterparts. Open economies influence
fundamental aspects that determine economic growth, i.e., foreign trade, capital, labor,
knowledge, investment movements, and technological advancement. This, coupled with
deregulation policies and advancement in transport and communication, facilitates stronger
integration and interaction with developed economies leading to greater economic gains from
an investment, foreign trade, international technology transfer, and foreign remittances.
In the long-run, the growth of the economy is as a result of total factor productivity
improvements (Kim & Lin, 2009, 1213). These gains emerge via diffusion of technology and
factor imputs innovations. Openness to trade openness facilitates this process depending on the
absorption capacity of a nation according to (Krueger & Berg 2003; Lucas, 1988). It is often
determined by R&D and human capital (Fagerberg 1994, 1150; Verspagen 1991, 365).

26
Some empirical literature identify a positive relation between economic globalization and
economic growth (Chang, Kaltani, and Loayza, 2009, 35; Jouini, 2015, 342; Kim, 2011, 680).
Economic globalization has been applauded for holding out the potential for a new era of
economic growth for developing and emerging economies countries (Stiglitz, 2016). Most
economies in South East Asia attained rapid economic growth after independence as a result
of embracing economic globalization. By increasing the market size, economic globalization
enables these nations to enjoy specialization and increasing returns to scale (Alesina, Spolaore
& Wacziarg, 2000; Bond, Jones, & Ping, 2005,).
Currently, there is much potential for economic globalization and Western policy to promote
economic development and growth on the continent. Economic globalization can also
accentuate reform programs in DC’s (Rajan & Zingales, 2003,10; Sachs & Warner, 1995).In
Kenya empirical studies by Nyamwange (2009), Voorpijl (2011) and Musau (2011) indicates
that FDI as an aspect of economic globalization affects the economy positively. However, the
existing literature is limited in explaining the overall impact of economic globalization on
Kenya’s economic growth. In recent decades, the Kenyan government has been formulating
policies aimed at encouraging the economic aspect of globalization through foreign trade,
investment, and technological spill overs. These policies are often implemented under
expectation of stimulating economic growth. This study aims to overcome the shortfalls of the
previous existing literature on measuring the overall quantitative aspect of economic
globalization on Kenya’s economic growth in a single measure (GDP) by incorporating the
major elements of economic globalization which include foreign trade, FDI, International
Portfolio Investment, IIT and International Remittances.
Therefore, this study aims to fill the in-research gap on the effects of economic globalization
on growth in SSA with Kenya as the case study. Furthermore, this study will consider the
impact of complementary policies on the growth effects of economic globalization on Kenya

27
CHAPTER THREE: METHODOLOGY
3.1 Introduction
The chapter presents the approach utilized in establishing the impact of globalization on
Kenya’s economic growth. The first part introduces theoretical framework while the second
bit presents the empirical model that will be applied. The third section focuses on the diagnostic
tests and the model utilised to estimate the variables. The last section presents the definitions
and descriptions of our estimable variables and data sources.
3.2 Theoretical Framework
The Harrod-Neutral endogenous growth theory for an open economy serves as the study basis.
Each production factor contributing a specific ratio to the output, this is a modification of the
Solow endogenous growth model to factor in an open economy.
𝑌𝑡 = 𝑓(𝐾𝑡, 𝐴𝑡𝐿𝑡) ………………………………………………………………………. (i)
This function utilizes labor-augmenting technology with labor in abundance in Kenya. In this
theory economic growth (Yt) is as a result of increase in labor (L), labor-augmenting
technology (A) and capital growth (K).The, steady-state level of capital per effective worker
accentuates economic growth and is also dependent on savings level (Investment), depreciation
rate of capital, technological progress and, population growth. This study assumes that Foreign
Trade,FDI and portfolio Investment represents capital (Kt),technological advancement(At) is
represented International technological transfer while (Lt) represents foreign remmitances by
Kenyan labor abroad .This means that foreign trade (FTRD), foreign investment (FDI and
International Portfolio Investment), International technological transfer (ITT) and foreign
remittances as factor inputs affect economic growth.
3.3 Empirical Model.
The study utilised ARDL time-series estimation technique to estimate the variables of interest
following the examples of Pesaran and Shin (1999); Pesaran et al. (2001); Maduka et al.,
(2017); Pahlavani et al., (2005) & Meraj, M. (2013).
We construct a function that incorporates the following factor inputs: foreign trade (FTRD),
foreign direct investment (FDI), portfolio investment (PTFL), International technological
transfer (ITT), and remittances (REM). The dependent variable is Gross Domestic Product
(RGD) specified as;

28
GDPt = f (FDIt, FTRDt, PTFLt, REMt, TTIt) ……………………………………………………. (ii)
Incorporating the error term and taking natural log of both sides of the equation, the function
is stipulated as follows:
LnGDP = β0 + β1lnFTRDt + β2lnFDIt + β3lnPTFLt +β4 lnREMt + β5lnITTt +𝜀𝑡............ (iii)
ln = natural logarithm Where β1, β2…... β5 are coefficients of elasticities.
ε = White noise error term
3.4 Variables definitions and expected sign.
Table 1: Variable Description and Expected Sign
Variable
Name
Notation Variable Description Expected
Sign
Source
Gross
Domestic
Product
GDP Gross Domestic Product at constant
prices.
Positive UNCTAD
Statistics.
Foreign
Trade.
FTRD Sum of both imports and exports at
current prices
Positive UNCTAD
Statistics.
Foreign
Direct
Investment
FDI The sum of both inward and
outward Foreign Direct Investment
at current prices.
Positive UNCTAD
Statistics.
Portfolio
Investment.
PTInv Portfolio equity net inflows at
current prices.
Positive World Bank
World
Development
Indicators.
Remittances REM Personal remittances receipts and
payments at current prices.
Positive UNCTAD
Statistics.
International
Technological
transfer
ITT Proxied by the number of patent
applications, non-residents.
Positive World Bank
World
Development
Indicators.

29
3.4.1 Estimation Techniques.
Following Maduka et al., (2017), Meraj, M. (2013); Owusu & Odhiambo (2014) this study will
investigate the regression model above empirically using the ARDL technique. This is
informed by the fact that ARDL estimates both the long-run and short-run time series
parameters more efficiently as opposed to OLS estimation technique. In Addition to that, this
technique is preferable when dealing with variables with different integration order, i.e., I (0)
and I (1) while OLS can only estimate I (0). Some researchers such as (Ghatak & Kargbo,
(2012); Mall, 2013; Pattichis, 1999) posit that ARDL approach, irrespective of the sample size,
yields robust results. The ARDL model is specified as follows;
∆𝑙𝑛𝐺𝐷𝑃𝑡 = 𝛼0 + 𝛼1𝑡 + ∑ 𝛽1
𝑝
𝑖=1 ∆𝑙𝑛𝐺𝐷𝑃𝑡−1 + ∑ 𝛽2∆𝑙𝑛𝐹𝑇𝑅𝐷𝑡−1
𝑃
𝑖=1 + ∑ 𝛽3∆𝑙𝑛𝐹𝐷𝐼𝑡−1
𝑝
𝑖=1 +
∑ 𝛽4∆𝑙𝑛𝑃𝑇𝑖𝑛𝑣𝑡−1
𝑝
𝑖=1 + ∑ 𝛽5∆𝑅𝐸𝑀𝑡−1
𝑝
𝑖=1 + ∑ 𝛽6∆𝐼𝑇𝑇𝑡−1
𝑝
𝑖=1 + 𝜀𝑖𝑡 ………….. (iv)
The ∆ are known as the first difference operators. The constant term is denoted by 𝛼0 while 𝛼1
denotes trend. The optimal lag length is denoted by 𝜌 which is chosen with information
criterion assistance. Parameters 𝛽1𝑡𝑜 𝛽6 represent the coefficients of estimates. The 𝜀𝑖𝑡 is the
disturbance or white-noise error term.
3.5 Diagnostic tests.
The study will employ the following diagnostic tests.
3.5.1 Normality test.
The normal distribution is the underlying assumption in many statistical procedures. When the
study violates this assumption, it affects the inferences and interpretations of the variable
coefficients. This results in an abnormality of the estimated parameters thus affecting the
hypothesis tests. Therefore, it is incredibly vital to test the data’s normality before proceeding
with the relevant statistical procedures.
The normality determines whether the data follows a normally distributed population. This test
establishes whether the data are evenly distributed that is mean, mode and median of a dataset
are the same (Gujarati & Porter, 2009). The study will utilize the Shapiro-Wilk (1965) test for
normality. It is the most powerful parametric test choice for testing normality of the data as it
provides more power than other normality tests.

30
3.5.2 Augmented Dickey-Fuller Test.
Most of the macroeconomic datasets are not stationary. They showcase a stochastic trend. A
series is stated as stationary if the mean, variance and autocorrelation are time invariant. That
is if they are constant over time. To test for a unit root, the study will employ the ADF test
because it is more powerful than the Dickey-Fuller tests and can handle more complex models.
The optimal lag length was determined by using the BIC criterion, HQ criterion, FPE criterion,
AIC criterion
3.5.3 Test for Structural Breaks Presence.
In recent time series periods, the structural breaks analysis has gained relevance according to
(Glynn, Perera, and Verma, 2007). Structural breaks occur because of unexpected shift of
variables in time series. This shift leads to a shift in other parameters that affect or produce the
time series hence resulting in unrealistic estimated parameters which cannot be used to forecast
in future. When it occurs in time series, traditional unit roots test, i.e., ADF, PP tests are
ineffective in detecting unit roots Conteh, 2010). Structural breaks happen because of wars,
environmental disasters etc. According to Ndirangu, Garcia, and Gitau (2014), more accurate
forecasts can be drawn from time series models that test for structural breaks presence. As such
this study will employ Wald test investigate for the presence of structural breaks in GDP.
3.5.4 Cointegration Test.
This test determines whether a time series has a long-run relationship. Engle &Granger (1987)
formalized the cointegration idea. They came up with a test and estimation procedure for a
long-run relationship for a variable set in a dynamic specification framework. It establishes the
economic and statistical basis for an empirical error correcting model that brings together both
the short and long-run information in the model variables. This test is critical in that it
establishes whether the model exhibits a significant long-run relation. This study will employ
the Johansen cointegration test.
3.6 Data types, and Sources.
The research will use annualised time-series secondary data spanning from the year 1980 to
2017 extracted from UNCTAD, and World Bank for our economic analysis. The study will
gather secondary data for foreign trade, foreign direct investment (FDI), international
remittances to Kenya, patent applications for non-residents (IIT) and international portfolio
investment.

32
CHAPTER FOUR:
MODEL ESTIMATION, EMPIRICAL FINDINGS AND DISCUSSION.
4.1 Introduction
This chapter presents the empirical results and the interpretation of the time series data
adopted. It commences with descriptive statistics that gives the summary of the variables,
diagnostic tests which are then followed by the results of the model.
4.2 Descriptive Statistics Summary.
The descriptive statistics summarizes the data features.
Table 2: Descriptive Statistics Summary
Variable N Mean Std.
Deviation
Min Max Skewness Kurtosis
GDP 38 9.850318 0.6808165 9.011031 11.28425 0.009 0.8694
FTRD 38 9.144224 0.7671493 8.018153 10.35827 0.0252 0.3487
FDI 38 4.060591 2.071119 -0.9416085 7.307388 0.0000 0.2597
PTInv 38 15.58093 2.042528 12.50455 20.67653 0.0000 0.0000
ITT 38 4.348333 0.8722788 2.079442 5.572154 0.0314 0.9662
REM 38 19.25499 1.274843 17.13766 21.39736 0.0015 0.1833
Source: Author (2017).
Table 2 Highlights the summary of all the variables under study from 1980-2017. The variables
are as follows GDP, Foreign trade (FTRD), Foreign Direct Investment (FDI), Portfolio
Investment (PTInv), International Technological Transfer (IIT) and International Remittances
(REM).
Skewness and Kurtosis measures the behaviour of the variables. Skewness indicates how the
symmetrical the data is i.e. if it looks the same both to the left and to the right from the centre
or lack of it. Symmetric values are skewed towards the zero value. Positive values showcase

33
that the data is skewed towards the right while negative values showcase the data is skewed
towards the left. Kurtosis estimates if the heaviness of the tails. A normal distribution standard
kurtosis is between zero and three. Data with very high kurtosis tends to have outliers or heavy
tails. Those with low kurtosis or lack of outliers or tends to have light tails.
Table 4.1 also indicates that all the variables are skewed to the right with a very small degree
of skewedness closer to zero meaning they are positively skewed. All the variables in the study
have a positive kurtosis that is closer to zero indicating a "heavy-tailed" distribution.
Table 3: Normality Test: Shapiro Wilk Test.
The study did a Shapiro-Wilk normality test at 5% significance level(∝= 0.05). If Prob>Z (the
p-value) is less than 0.05, it signifies non-normality hence reject H0 (the data is normally
distributed) while any value> 0.05 signifies normality hence we hail to reject H0. According to
the results on the table GDP, FTRD, FDI, PTInv, ITT and REM values are < 0.05; hence the
data does follow a normal distribution.
4.3 Stationarity Test.
Table 4: ADF Stationarity Test.
rem 38 0.78182 8.291 4.437 0.00000
iit 38 0.89732 3.902 2.856 0.00214
ptinv 38 0.34160 25.020 6.755 0.00000
fdi 38 0.65923 12.950 5.373 0.00000
ftrd 38 0.84089 6.047 3.775 0.00008
gdp 38 0.76044 9.104 4.634 0.00000
Variable Obs W V z Prob>z
Shapiro-Wilk W test for normal data

34
Variable. Levels. Differencing
Order.
Difference
Statistic Comment Statistic Comment.
GDP 6.738 * Non-stationary 1 -4.970* Stationary
FTRD 0.502 Non-stationary 1 -5.088* Stationary
FDI -1.800 Non-stationary 1 -10.145 * Stationary
PTInv -3.452** Stationary 0 -3.452** Stationary
ITT -1.622 Non-stationary 1 -4.029* Stationary
REM 1.704 Non-stationary 1 -4.422 * Stationary
Asterisk (*) =Significance at 1 %;(*), Significance at 5 %(**), Significance at 10%(***).
This Study employed the ADF to test the Hypothesis that;
H0: The series is non-stationary.
H1: Series is stationary.
We reject the H0 if the ADF test statistic (in absolute value) is greater than McKinnon’s critical
values (1%, 5%, and 10%) at different significance levels indicated by the asterisk. The
variables GDP, FTRD, FDI, ITT, and REM were found to be stationary at (I (1) while PTInv
was found to be stationary without differencing, I (0).
4.4 Lags Selection Criteria
Table 5: Lags Selection Criteria.

35
The optimal lag selection for the variables is 4 as indicated by the asterisk (*).
4.5 Cointegration Test
Table 6: Cointegration Test
Trend:
Constant
Johansen Test for Cointegration. No of
Observations =36
Sample 1982-
2017
Lags=2
Maximum
Rank
Parms LL Eigen
Value
Trace
Statistic.
5% Critical
Value.
0 30 -155.24952 75.4693 68.52
1 39 -134.42671 0.87307
33.8237*
47.21
2 46 -125.46834 0.73045 15.9070 29.68
3 51 -120.87841 0.50038 6.7271 15.41
4 54 -117.75678 0.36544 0.4838 3.76
5 55 -117.51486 0.30544
Source: Author.
At zero rank H0: There’s no cointegration vector.
H1: There’s at least 1 cointegrating vector.
Exogenous: _cons
Endogenous: lngdp lnftrd lnfdi lnptinv lniit lnrem
4 2484.31 49.394 36 0.068 . -370.201* -370.898* -366.811*
3 2459.61 193.28* 36 0.000 . -366.402 -367.098 -363.012
2 2362.97 4577.2 36 0.000 . -351.534 -352.231 -348.144
1 74.3452 199.34 36 0.000 6.0e-10* -4.97619 -5.35136 -3.15097
0 -25.3233 5.0e-06 4.81897 4.76538 5.07972
lag LL LR df p FPE AIC HQIC SBIC
Sample: 1999 - 2016, but with a gap Number of obs = 13
Selection-order criteria

36
Decision: We compare the trace statistic and the critical values. If the trace statistic> critical
values we reject H0. In the case for rank 0, trace statistic 75.4693 > than critical value 68.52
hence we conclude that there’s at there’s at least 1 cointegrating vector
At Rank 1: H0: There’s 1 cointegration vector.
H1: There’s more than 1 cointegrating vector.
Decision: Trace statistic 33.8237* < critical value 47.21; hence we fail to reject H0 and
conclude that there is only 1 cointegrating vectors.
Test for Structural Breaks Presence
Because the p-value < 0.05 we reject H0 and conclude that there is a structural break in 2001.
.
Coefficients included in test: lnftrd lnfdi lnptinv lniit _cons
Exogenous variables: lnftrd lnfdi lnptinv lniit
swald 48.8696 0.0000
Test Statistic p-value
Ho: No structural break
Estimated break date: 2001
Trimmed sample: 1986 - 2012
Full sample: 1980 - 2017
Number of obs = 38
Test for a structural break: Unknown break date

37
4.6 Results summary.
Econometric results of the impact of economic globalization on Kenya’s economic growth.
Table 7: ARDL Estimates
GDP
LnGDP 1.388831***
(0.1963612)
LnFTRD -0.422692
(0.94802)
LnFDI 0.217241
(0.124932)
LnPTInv 0.0171759
(0.0046268)
LnITT 0.499552*
(0.198692)
LnREM -0.0870353
(0.404797)
Constant 2.01872**
R-Square
0.9882
Adj R-squared
0.9838
(0.5123582)
Observations 34
Standard errors in parentheses **
p < 0.05, *
p < 0.01, ***
p < 0.001

38
Interpretation of the results.
The estimated parameters for the relationship in the model showcase that if other factors remain
unchanged, a 1% increase in FTRD decreases real GDP by 0.422 % and with a p-value of 0.660
it is not statistically significant at all levels. These findings are in contrast with (Alesina et al.
2005; Almeida & Fernandes, 2008; Edwards 1993, 1364; Grossman & Helpman, 1991;
Baldwin et al., 2008; Barro & Sala-i-Martin, 1997; Sachs& Warner, 1995; Rajan and Zingales,
2003) who found out that open economies engaging in foreign trade growth much faster than
their closed counterparts.
A 1% increment in FDI increases GDP by 0.22 % ceteris paribus and with a p-value of 0.095,
it is statistically significant at the 10% level. These results agree with (Addison & Movrotas,
2005; Alesina et al, 2005; Damijan et al. 2003; Tekin, 2012) that FDI affects economic growth
positively.
A 1% increase in PTInv increases RGDP by 0.02 % and with a p-value of 0.001, it is
statistically significant at all levels. These results agree with (Alfaro et al., 2003) who stated
that Portfolio investment improve the general productivity levels in a nation by bridging the
technology gap, especially if it has a well- developed financial market
A 1% increase in ITT increases GDP by 0.5 % and with a p-value of 0.019, it is statistically
significant at the 5% level. The results agree with (Keller, 2004, p.752) that new and enhanced
technologies enable a DC’s to alleviate poverty through job creation and increase their exports.
A 1% increase in REM decreases GDP by 0.087 % and with a p-value of 0.001, the result is
statistically significant at all levels. These findings are in contrast with (Adams & Page, 2005;
Acosta et al., 2007; Nyamongo, E. et al (2012) who opined that remittances enhance economic
growth directly by boosting investments, savings, and consumption in addition to human and
capital formation.

39
CHAPTER FIVE
CONCLUSION AND POLICY RECOMMENDATIONS
5.1 Introduction
The chapter provides a summary, conclusions, policy relevance, recommendations, limitations
of the study that Kenya can utilize to improve the growth impact of the economic aspect of
globalization based in the outcomes.
5.2 Summary and Conclusions.
The objective of this study was to determine the impact of economic globalization on the
economic growth in Kenya. It utilised time series data spanning 1980-2017. The study utilised
FTRD, FDI, PTInv, ITT and REM as independent variables. To measure economic
globalization the study utilised FTRD, FDI and PTInv as proxies for economic globalization
while ITT and REM serve as control variables. The study concluded as follows;
The impact of FTRD on economic growth was found to be negative but insignificant. The
estimated parameters in the model showcase that ceteris paribus, a 1% increment in FTRD
reduced GDP by 0.42 %. It had a p-value of 0.66 which was statistically significant at all levels.
The impact of FDI on economic growth was found to be positive. A 1% increment in FDI
increases GDP by 0.22 % ceteris paribus and with a p-value of 0.095, it was statistically
significant at all levels. The study also found that PTInv had a positive and significant impact
on economic growth. A 1% increment in PTInv increases GDP by 0.02 % and with a p-value
of 0.002 it is statistically significant at the 5% level in the long-run. The effect of IIT on
economic growth was found to be positive and statistically significant. A 1% increment in IIT
increases GDP by 0.5 % and with a p-value of 0.019, it is statistically significant at the 5%
level. A 1% increment in REM decreases RGDP by 0.087 %. It had a p-value of 0.001, the
result is statistically significant at levels.

40
5.3 Policy Recommendations.
The study results showcase that foreign trade, FDI, Portfolio investment, international
technological transfer, and international remittances impact on economic growth. The impact
of foreign trade was found to contrary to the study’s expectation. To remedy this, the study
recommends the following policies geared towards improving foreign trade in Kenya. The
government should formulate policies that boost our balance of trade i.e. export subsidies to
lower the price of exports in international markets and increase demand, value addition of our
predominantly raw export s like tea and coffee by creating special economic zones for
manufacturing to increase their trade value which will boost our foreign currency reserves,
policies to effect import quotas for high-end luxury goods should also come in handy to limit
their uptake of foreign exchange.
Furthermore, the national government should create policies that make a conducive
environment for factor endowment exploitation. Kenya can boost its balance of trade and
foreign currency reserves if policies are formulated to enable both the private and public sector
to exploit our natural resources optimally for export sustainably i.e. the extractive industry and
the blue economy which are not well developed yet and have immense potential for growth
and revenue generation.
The study found that FDI and Portfolio investment had a positive, and significant impact on
economic growth. To boost their impact, policies geared towards creating a conducive
environment for the two should be formulated and implemented. In addition to, fiscal and
monetary policies such as corporate tax reduction, investor tax breaks, interest rates reduction
on loans should be implemented to encourage both FDI and Portfolio Investment.
The labor market should also be made flexible so that investors can access relatively cheap
labor in the manufacturing sector. In addition to the government should spearhead the

41
development of strong and independent institutions to mitigate the effects of malpractices such
as corruption which discourage investment. Also, we need to develop our financial markets to
tap into portfolio investors.
ITT was found to impact the economy positively. As a result, stringent policies should be
formulated and enforced to safeguards patents and licences from infringement, i.e. reverse
engineering. They include utility patent safeguard policies for tangible assets such as machines
and electronic devices and design patents policies to safeguard intangible assets. It is because
most investors are willing to invest in a nation that already has established intellectual
properties laws than the one without.
The study also found out that remittances do affect economic growth negatively. It could be as
a result of conspicuous consumption of imported luxury goods or increased inflation as the
pace of consumer demand as a result of remittance monies exceeds the productive capacity of
the country. To better harness the benefits of international remittances the government should
fast-track the process of getting visas and passports for Kenyan expatriates who work abroad.
It should also encourage more Kenyans to seek better opportunities abroad by liaising with
foreign governments to export surplus skilled labor in Kenya to where they are in high demand
with better remunerations to boot to increase international remittances.
Also, the government should formulate and implement policies that encourage remittance
channelling at lower costs and the wise use of remittance inflows to alleviate poverty. It should
also ensure macroeconomic stability to avoid uncertainty, i.e. high inflation which discourages
remittance inflows.

42
5.4 Limitations of the Study.
This study did not exhaust all the economic globalization aspects. It only factored in the
significant variables of economic globalization that impacts economic growth. It means that
other variables affect economic globalization that were not considered in this study.
5.5 Suggestions for Further Research.
This paper recommends extensive studies on the impact of technological transfer on economic
growth and development in Kenya. It is because the existing literature touching on the
aforementioned is thin and also its proxy that is the number of patents by non-residents may
not have captured the impact well.
Also, the study only covered Kenya as the case study. Therefore, it recommends that future
researchers should expand on the scope of this study to cover the Sub-Saharan African nations
at large so that these nations can come up with the appropriate policies to better harness the
positive aspects of economic globalization.
Future studies should also aim to investigate economic globalization and its impact on specific
sectors, i.e. service sector, manufacturing sector and agricultural sectors in order to showcase
how different sectors contribute to economic development or are affected by economic
globalization.

43
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