Of the foreign capital flows that are required for stimulating the process of economic growth, foreign direct investment (FDI) has been the most elected candidate that is often sought. This explains why so much effort has been geared towards its attraction thus paving the way for enquiry into its determinants. Arguably, apart from the conventional FDI-drivers, the importance of institutions has been grossly undermined. On this basis, the study sets out to unravel the causal linkage between institutions and FDI with a special focus on ECOWAS countries. The results showed the existence of prevalent weak governance structure among the ECOWAS countries. Further, on component-by-component basis, this result was robust to the decomposition of the governance indicator into the six sub-indices, namely: voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption. We split the sample size into low (poor institutions) and high regimes (be...

Institutions-FDI Nexus in ECOWAS Countries

How does foreign direct investment contribute to Sustainable Development Goals? Evidence from African countries

There seems to be a cloud of scepticism hanging over the value of entrepreneurship to the growth processes of developing economies. This haze of scepticism is fuelled by the reverberating mantra by a section of the extant literature that replicative entrepreneurship (entrepreneurship which is generally considered not to be growth-supporting) is pervasive in developing economies including Africa. We take motivation from this postulation to investigate whether entrepreneurship is of any relevance to the growth processes of 12 African countries. The results show that entrepreneurship positively explains the variations in the growth of the study countries. It is, thus, reasonable to contend that entrepreneurship in developing economies including Africa even if replicative is instrumental to economic growth.

Does Entrepreneurship Promote Economic Growth in Africa

Competing to be innovative: Foreign competition and imitative innovation of emerging economy firms

This paper investigates the link between foreign direct investment (FDI), democracy and economic growth on a panel of eight Southern African countries for 1980–2014 using the system generalized method-of-moment (GMM) estimator. We find that FDI has a direct positive effect on economic growth and that strong democratic institutions are a significant driver of economic growth in the sample countries. The impact of FDI on economic growth is dependent on the level of democracy in the host countries. This implies that countries with strong democratic institutions are better able to absorb the positive spillovers from FDI. In policy terms, Southern African countries should sustain the institutional reform policy agenda already in place in order to benefit more from the significant inflows of FDI.

Foreign Direct Investment, Democracy and Economic Growth in Southern Africa

This paper analyzed drivers of foreign direct investments (FDI) to West Africa using a panel dataset from 1970 to 2010. OLS and GMM techniques are used for the estimations. The main results indicate that there is a U-shaped relationship between economic development and FDI inflows to West Africa. In summary: (i) The quadratic element of real per capita GDP, domestic investment, trade openness, first year lag of FDI, natural resources (oil and metals) endowment and exports, and monetary integration have positive and significant effect on FDI inflows to West Africa; and (ii) there is a negative relationship between FDI inflows to the sub-region and loan component of ODA, economic growth, level of economic development (real GDP per capita), life expectancy, and domestic credit to the private sector.

What Drives Foreign Direct Investments into West Africa? An Empirical Investigation

This paper analyzed the factors that drive foreign direct investments (FDI) by looking at regional heterogeneity among the five African regions. For the first time, FDI drivers are analyzed for each of the five regions of Africa contrary to previous studies which focused on Africa as a whole. The paper used a panel dataset from 1970 to 2010 of 53 African countries divided into: Central, East, North, Southern, and West Africa. Ordinary least squares (OLS) and generalized method of moments (GMM) techniques are used for the estimations. The main results indicate that: (i) agglomeration has a strong positive relationship with FDI inflows in all the regions except Central Africa. However, in West Africa, the second lag of FDI is significantly negative; (ii) there is a negative relationship between FDI inflows and GDP per capita in all the five regions, but a U-shaped relationship is observed in Central, North, and West Africa. But GDP growth rate has a strongly positive relationship with FDI inflows in Central Africa but negatively significant in West Africa; (iii) FDI follows domestic investment in East, Southern, and West Africa; (iv) democracy is a major factor in attracting FDI to Southern Africa, being upward concave; (v) infrastructure development has a positive impact on FDI inflows in East and North Africa; (vi) trade openness has a positive relationship with FDI inflows in all the five regions except in East Africa; (vii) inflation deters FDI inflows to East Africa; (viii) the level of urbanization has a strong positive relationship with FDI inflows only in West Africa; (ix) net foreign aid has a negative relationship with FDI inflows to East, North, and Southern Africa; (x) higher life expectancy deters FDI inflows to Central Africa but promotes the same to East and North Africa; (xi) metal production and exportation attract significant FDI to Central Africa while oil production and exportation attract higher FDI to West Africa; (xii) monetary union attracts greater FDI to Central and West Africa; and (xiii) political instability is a strong hindrance to FDI inflows to West Africa.

Regional Comparison of Foreign Direct Investment to Africa: Empirical Analysis

Foreign direct investment (FDI), which may be flow or stock, represents the investment of foreign assets into domestic structures, equipment, and organizations. The parent multinational corporations (MNCs) may use vertical, horizontal, or conglomerate integration in carrying out the requisite FDI. Such investments may take various typologies, including resource-seeking, market-seeking, efficiency-seeking, and/or strategic (created) asset-seeking FDI.

Nadege D. Yameogo

Papers

What Drives Foreign Direct Investments into West Africa? An Empirical Investigation

Regional Comparison of Foreign Direct Investment to Africa: Empirical Analysis

FDI in the Middle Eastern and North African Countries