Inward FDI and InnovationIn the Context of a Least Developed Country - A single case study on the innovation system of Kigali, Rwanda

Abstract

Previous research shows a theoretical debate regarding the relationship between inward FDI and local innovation, where researchers argue for further research with a contextual focus. In the setting of Rwanda and its aspiration to transform from a least developed country to a knowledge-based service economy, this case study aims to understand how local actors perceive the relationship between inward FDI and innovation. The study also intends to explain how the regional innovation system in Kigali can help SMEs utilise the potential benefits and mitigate the risks of adverse effects of increased levels of inward FDI. Through an abductive approach, a conceptual framework was derived from literature on FDI, its spillover effects, and innovation systems. This framework was further used to analyse findings and observations based on 14 semi-structured interviews conducted with local actors on-site in Kigali. As positive and negative effects could be identified, the results show that the perceived relationship between inward FDI and local innovation in Kigali is mixed. However, it is essential to acknowledge that the general perception of the relationship was found to be predominantly positive. Furthermore, with an emphasis on the vision and policies provided by the government, the role of intermediaries and culture underpinning innovation, it was found that activities in the regional innovation system in Kigali could promote and mitigate these positive and negative effects. Lastly, the thesis sheds light on how regional innovation systems in LDCs can empower local SMEs to utilise FDI spillovers through increased innovation capabilities.