Drivers of foreign direct investment: new evidence from West African regions
Drivers of foreign direct investment: new evidence from West African regions
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Date
2020
Authors
Gyimah, Prince
Amanamah, R B
Korsah, E
Journal Title
Journal ISSN
Volume Title
Publisher
Emerald
Abstract
Purpose – This paper aims to empirically investigate the factors attracting foreign direct investment (FDI)
inflows into emerging economies.
Design/methodology/approach – This study uses secondary data from the World Bank and the Global
State of Democracy Indices of 16 West African countries (WACs) over the period from 1989 to 2018. Fixed- and
random-effects econometric regression models are used to assess the nexus between 12 macroeconomic
indicators (including political risk and cultural factors) and FDI inflows into WACs.
Findings – The critical drivers of FDI inflows into WACs are the richness of natural resources, market size or
gross domestic product (GDP), imports and exports of goods and services, trade openness and the currency’s
strength as measured by the exchange rate. The result also reveals that French-speaking countries attract more
FDI than other English-speaking countries. The previously cited determinants of FDI, such as infrastructural
development, inflation, tax and political stability, are insignificant in determining FDI inflows into WACs.
Originality/value – This study uncovers the critical drivers explaining the FDI inflows into WACs, where
FDI accounts for 39% of external finance. The study’s contribution is that Francophone WACs attract more
FDI than Anglophone WACs. The most important drivers of FDI are abundant natural resources, GDP,
imports, exports, trade openness and exchange rate
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Citation
Korsah, E., Amanamah, R. B., & Gyimah, P. (2022). Drivers of foreign direct investment: new evidence from West African regions. Journal of Business and Socio-economic Development.