Ownership, location specific and internalization determinants and foreign direct investment inflows: a case study of selected foreign firms in Uganda

Abstract

This study was initiated to investigate the determinants of foreign direct investment inflows to Uganda. The researcher was inspired to investigate the influences of foreign direct investment in Uganda following an increase in foreign direct investments to Uganda. While foreign companies investing in Uganda had grown from 52 in 1996 to 657 companies by 2014, and from a value of 160 in 1996 to 280 million dollars by 2014, representing an average growth rate of 50% per annum, the growth rate over the same period in other East African countries was however significantly lower than that of Uganda, yet they have similar environment. The researcher was thence desirous to find out those factors that influence this significant increased foreign direct investment flow into Uganda. The study employed cross - sectional research design that used qualitative and quantitative methods in data collection. The study involved systematic collection of data from key decision makers, who identified those factors that led them into a decision to invest in Uganda, analyzing the collected data, making conclusions and recommendations and citing areas for further research. Analysis and interpretation of the findings revealed that ownership specific, location specific and internalization significantly determined the amount of foreign direct investment inflow to Uganda, at 0.334, 0.608 and 0.485 respectively. From the regression analysis, it is revealed that of the three determinants, location specific factors significantly predict foreign direct investment inflow decisions by 0.669. The combined coefficient for all the three variables (R Square) is 0.448. The study therefore concludes that ownership specific, location specific and internalization determinants significantly explain foreign direct investment inflows to Uganda. The researcher makes a number of recommendations to enhance FDI investment that include: policy makers should focus on location specific factors that create a competitive advantage for Uganda to boost further foreign investment, policy makers should advocate for infrastructure development, and the need to re-examine the investment policy to reduce on the number of unrealized licensed projects