Institutional Quality, Investors Objectives and FDI Inflow in African Regions
Keywords:
Foreign direct investment; Market seeking; Efficiency seeking; Institutional QualityAbstract
This paper investigates the impact of institutional quality and investors’ objectives on Foreign Direct Investment (FDI) inflows using the system Generalized Method of Moments (GMM) for the sample period of 1996–2019. The empirical findings confirmed that institutional quality does not determine FDI inflows in the selected countries across the five (5) African regions while, investors’ objectives were found to influence FDI inflows across the selected countries. The magnitude of the coefficients of political stability, control of corruption and rule of law are less significant. This study therefore concluded that institutional quality was not pungent to endogenously work with other macroeconomic variables to attract FDI inflows in the five (5) African regions during the period of investigation. However, market seeking objectives crowd-out FDI inflows negatively while efficiency seeking objective have positive impact on FDI inflows in the five African regions. Hence, the analysis inferred that investors’ objectives are the core determinants of FDI inflows in the five African regions.
References
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Acemoglu, D., and Robinson, J. A. (2008). Persistence of Power: Elites and Institutions. American Economic Review, 98(1), 267 293. Retrieved 16 March, 2019 from http://dx.doi.org/10.1257/aer.98.1.267
Ajide, K.O., & Adeniyi, I. R. (2014).“Does governance impact on the foreign direct investment-growth nexus in Sub-Saharan Africa: Zagreb International Review of Business, Vol. 17, No. 2, pp. 71-81.
Alonso-Borrego, C., & Arellano, M. (1999).Symmetrically Normalized Instrument-Variable Estimation Using Panel Data.Journal of Business and Economic Statistic, 17(1), 36-49.
Akpo, E. S., and Hassan, S. (2015). Institutional Quality Matter: An Empirical Investigation of Foreign Direct Investment in Nigeria. E-Journal of the Social Science Researches, 3 (4), 60 -74.
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. Rev Econ Stud 58(2):277–297.
Arellano, M., & Bover, O. (1995). Another Look at the Instrumental Variable Estimation of Error
Components Models. Journal of Econometrics, 68(1), 29 52. Retrieved on 7 March, 2019 from http://dx.doi.org/10.1016/03044076(94)01642-D
Asamoah, M.E., Adasi, CKD. & Alhassan, AL. (2016). Macroeconomic uncertainty, foreign direct investment and institutional quality: evidence from sub-Saharan Africa economic system, vol 40, pp 612–621.
Asiedu, E., & Villamil, A.P. (2000). Discount factors and thresholds: Foreign investment when
Asiedu, E. (2006). Foreign direct investment in Africa: the role of natural resources, market size, government policy, institutions and political stability. World Economy, 29(1), 63‐77.
enforcement is imperfect. Macroeconomic Dynamics, 4(01), 121. doi:10.1017/S1365100500014012
Bartels, F.I., Kratzsch, S., & Eicher, M. (2008). Foreign direct investment in sub-Saharan Africa: Determinants and location decisions. Research and Statistics Branch Working Paper 08/2008.
Buckley, P., & Casson, M. (1976). The Future of the Multinational Enterprise, Holmes and Caves, R. International Corporations: The Industrial Economics of Foreign Investment. Economica, vol. 38, no.149, p.l.
Buchanan, B., Le, Q. V., & Rishi, M. (2012). Foreign direct investment and institutional quality
Busse, M., and Hefeker, C. (2007). Political risk, institutions and foreign direct investment.Eur J. Polit Econ, 23(2):397–415.
Busse, M., & Groizard, J.L. (2008). Foreign direct investment, regulations and growth: The World Economy, Vol. 31, No. 7, pp.861–886.
Trade, location of economic activity and the MNE: A search for an eclectic approach. In B. Ohlin, & P. O. Hesselborn (Eds.), The International Allocation of Economic Activity (pp. 395-418). London, Macmillan. http://dx.doi.org/10.1007/978-1-349-03196-2_38
Dunning, J. (1993). Multinational Enterprises and the Global Economy. Wokingham: Addison-Wesley Publishing Company.
Dunning, J. H. (1988). The Eclectic Paradigm of International Production: A restatement and some possible extensions. Journal of International Business Studies, 19(1), 131. http://dx.doi.org/10.1057/palgrave.jibs.8490372
Dunning, J.H. (1998). Location and the multinational enterprise: a neglected factor? J Int Bus Studies 29(1):45–66.
Dunning, J. (2001). The Eclectic (OLI) Paradigm of International Production: Past, Present and Future. International Journal of Economics and Business, 8(2) pp. 173-90.
Gastanaga, V.M., Nugent, J.B., & Pashamova, B. (1998). Host country reforms and FDI inflows: How much difference do they make? World Development, 26(7), 1299–1314.
Hymer, S. (1976). The International Operations of National Firms: A Study of Direct Foreign Investment. Cambridge, MA: MIT Press.
Kariuki, C. (2015). Determinants of foreign direct investment in Africa Union”, Journal of Economics, Business and Management, Vol. 3, No. 3, pp. 346-351.
Masron, T.A., & Abdullah, H. (2010). Institutional quality as a determinant for FDI inflows: Evidence from ASEAN. World Journal of Management, 2(3), 115 – 128. https://doi.org/10.1.1.470.4575
Mateev, M., & Tsekov, I. (2012).Do Central and Eastern European countries possess FDI advantages to more developed Western countries.American University in Bulgaria (AUBG).
North, D.C. (1990). Institutional change and economic performance. Cambridge: Cambridge University Press.
UNCTAD, (2012). The New Partnership for Africa’s Development: Performance, Challenges, and the Role of UNCTAD, Retrieved on 4 March, 2019 from;
World Bank, (2011).“World development indicators” Documents/tdbex55d3 en.pdf.
Wei, S. J. (2000). How taxing is corruption on internal investors? Review of Economics and Statistic, 82(1), 1-11. Retrieved10 Dec. 2019 from http://dx.doi.org/10.1162/003465300558533
Wolf, M. (2008). Fixing global finance. John Hopkins Press.
World Bank (2013). “World development indicators” World Bank database Washington DC.
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Published
2021-05-10
How to Cite
George, . E. O., Aberu, F., & Adegboyega, S. B. (2021). Institutional Quality, Investors Objectives and FDI Inflow in African Regions: Array. Acta Universitatis Danubius. Œconomica, 17(3). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/976
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Economic Development, Technological Change, and Growth
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