Investors’ Objectives and Foreign Direct Investment inflows in African Regions
Abstract
This study increases the frontier of FDI inflows literature by investigating the impact of investors’ objectives on FDI inflow in the five (5) African regions between the periods 1996 to 2020. To achieve this aim, panel data techniques (system GMM, fixed effects and PMG) were employed on a sample of selected countries across the five (5) African regions. The empirical results showed that market seeking objective influenced FDI inflows activities in the selected countries across the five (5) African regions. Meanwhile, efficiency seeking objective also determined FDI inflows in the selected regions but with the elasticity of 0.09 that is less significant for specifications for the period of investigation with SGMM technique. Furthermore, the pooled mean group estimation technique confirmed the structural and behavioural differences in FDI inflows among the five (5) African regions when analyzed separately, FDI inflows in all African regions was market and efficiency seeking objectives determined. However, from the empirical findings, there are resultant policy implications. These policy implications include that, African regions should intensify efforts to engage in an integrated common market that is FDI inflow induced and ensuring evidence based policies that are liberalization friendly such as reduction of taxes, licenses and insecurity.
References
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Suliman, A. H., &Mollick, A. V. (2009). Human capital development, war and foreign direct investment in Sub-Saharan Africa. Oxford Development Studies, 37(1), 47–61.
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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
Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: Is Africa different? World Development, 30(1), 107–119.Asiedu, E. (2006).
Asiedu, E., & Lien, D. (2011). Democracy, foreign direct investment and natural resources. Journal of International Economics, 84(1), 99–111.
Bandera, V., and White, J. "U.S. Investment and Domestic Markets in Europe." Economia Internazionale, vol. 21, no. 2 (1968).
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.
Benassy-Quere, A., Coupet, M., & Mayer, T. (2007). Institutional determinants of foreign direct investment. The World Economy, 30(5), 764–782.
Bevan, A. A., & Estrin, S. (2004). The determinants of foreign direct investment into European transition economies. Journal of Comparative Economics, 32(4), 775–787.
Blundell, R. & Bond, S. (1996). “Initial conditions and moment restrictions in dynamic panel data models.” Journal of Econometrics.1998; 87(1):115–143. https://doi.org/10.1016/S0304-4076 (98) 00009-8.
Buchanan, B., Le, Q. V., & Rishi, M. (2012). Foreign direct investment and institutional quality
Cheng, L. K., & Kwan, Y. K. (1999). What are the determinants of the location of foreign direct investment? The Chinese experience. Journal of International Economics, 51, 379–400.
Brouthers, L. E., Werner, S. and Wilkinson, T. J. (1996). The Aggregate Impact of Firms FDI Strategies on the Trade Balances of Host Countries, Journal of International Business Studies. 27 (2), 359-373.
Cleeve, E. A. (2008). How effective are fiscal incentives to attract FDI to Sub-Saharan Africa?. The Journal of Developing Areas, 42(1), 135–153.
Cleeve, E. A. (2012). Political and institutional impediments to foreign direct investment inflows to sub-Saharan Africa. Thunderbird International Business Review, 54(4), 469–477.
Dunning, J. H. (1993). Toward an eclectic theory of international production: Some empirical tests. Journal of International Business Studies, 11, 9–31.Dunning, J. H. (1998).
Dunning, J. H. (1998). Location and the multinational enterprise: A neglected factor. Journal of International Business Studies, 29(1), 45–66.
Farmer, R., and Richman, B. "A Model for Research in Comparative Management." In Readings in International Business, edited by R. Farmer et al. Encino, Calif.: Dickenson Publishing Co., 1972
Godwin, O., Junifer P., & Allan, W. (2015). The motive of inward FDI into sub-Saharan African countries. Journal of policy modeling, 37(2015)875-890.
Ijirshar, V.U (2019) Impact of Trade Openness on Economic Growth among ECOWAS Countries: 1975-2017, Journal of Applied Statistics Vol. 10 No. 1 (June, 2019) 75-96.
Kar, S. (2013). Exploring the causal link between FDI and human capital development in India. Decision, 40(1–2), 3–13.
Loewendahl, H. (2001). A framework for FDI promotion. Transnational Corporations, 10(1), 1–42.
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
Masuku, M. B., & Dlamini, T. S. (2009). Determinants of foreign direct investment inflows in Swaziland. Journal ofDevelopment and Agricultural Economics, 1(5), 177–184.Moosa, I. A. (2002). Foreign direct investment: Theory, evidence and practice. Palgrave Publishers.
Mottaleb, A. K., & Kalirajan, K. (2010). Determinants of foreign direct investment in developing countries: A comparative analysis. Journal of Applied Economic Research, 4(4), 369–404.
Naude´,W. A., & Krugell, W. F. (2007). Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data. Applied Economics, 39, 1223–1233.
Ndeffo, N. (2010). Foreign direct investments and human capital development in Sub-Saharan Africa Luc. Annals of “Dunarea de Jos” University of Galati: Fascicle 1. Economics and Applied Informatics, 16(2), 37–50.
Ofori-Brobbey, K., & Ojode, L. (2009). The effect of governance quality on foreign direct investment flows into Sub-Saharan Africa. The Journal of International Management Studies, 4(2), 222–230.
Phongpaichit, P. (1990). The new wave of Japanese Investment in Asia. Singapore: Institute of Southeastern Asian Studies.
Reuber, G. Private Foreign Investment in Development. Oxford: Clarendon Press, 1973
Root, F. (1994). Entry Strategies for International Markets. New York: Macmillan.
Scaperlanda, A., and Mauer, L. "The Determinants of U.S. Direct Investment in (1968). the EEC." American Economic Review, vol. 59, no. 4 (1969).
Suliman, A. H., &Mollick, A. V. (2009). Human capital development, war and foreign direct investment in Sub-Saharan Africa. Oxford Development Studies, 37(1), 47–61.
Svetlicic,M. and Rojec,M. (1994). Foreign Direct Investment and the Transformation of Central European Economies, Management International Review, 34, 293-312.
Thomsen, S. (2005). Foreign Direct Investment in Africa: The Private Sector Response to Improved Governance, Chatham House Briefing Paper, IEP BP 05/06.
UNCTAD, (2019). The New Partnership for Africa’s Development: Performance, Challenges, and the Role of UNCTAD, Retrieved on 4 March, 2019 from;
Wolf, M. (2008). Fixing global finance. John Hopkins Press.
World Bank (2013). “World development indicators” World Bank database Washington DC.
World Bank (2016).
Published
2021-05-07
How to Cite
Aberu, F., George, E. . O., & Adegboyega, S. B. (2021). Investors’ Objectives and Foreign Direct Investment inflows in African Regions: Array. EuroEconomica, 40(1). Retrieved from https://dj.univ-danubius.ro/index.php/EE/article/view/912
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