Determinants of Foreign Direct Investment in Sub- Saharan African Countries: Role of Third Country Effects

Sodiq Arogundade; Biyase Mduduzi; Hinaunye Eita

doi:10.31920/1750-4562/2022/v17n2a2

Determinants of Foreign Direct Investment in Sub- Saharan African Countries: Role of Third Country Effects

Sodiq Arogundade, Biyase Mduduzi, Hinaunye Eita

University of Johannesburg

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

This study examines the impact of third-country effects on the locational choice of multinational enterprises (MNEs). The study used a spatial econometric model on a panel of 33 SSA countries spanning 1996-2018. Our empirical results lend support to the substitution effect of FDI in the region. This means that FDI flows to a particular host country substitutes the FDI to other host countries in the region. The results further suggest that the motive of MNEs is characterized by export-platform. In addition to the evidence of spatial interdependence among SSA countries, our empirical findings show that there are both direct and spillover effects of FDI determinants. The study recommends that the host economy should consider the surrounding countries' characteristics in their FDI promotional policy formulation.

Original language	English
Pages (from-to)	35-62
Number of pages	28
Journal	African Journal of Business and Economic Research
Volume	17
Issue number	2
DOIs	https://doi.org/10.31920/1750-4562/2022/v17n2a2
Publication status	Published - Jun 2022
Externally published	Yes

Keywords

and Sub-Saharan African Countries
Export Platform
Foreign Direct Investment
Spatial Econometrics
Third-country effect

ASJC Scopus subject areas

Business and International Management
Economics and Econometrics

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.31920/1750-4562/2022/v17n2a2

Cite this

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abstract = "This study examines the impact of third-country effects on the locational choice of multinational enterprises (MNEs). The study used a spatial econometric model on a panel of 33 SSA countries spanning 1996-2018. Our empirical results lend support to the substitution effect of FDI in the region. This means that FDI flows to a particular host country substitutes the FDI to other host countries in the region. The results further suggest that the motive of MNEs is characterized by export-platform. In addition to the evidence of spatial interdependence among SSA countries, our empirical findings show that there are both direct and spillover effects of FDI determinants. The study recommends that the host economy should consider the surrounding countries' characteristics in their FDI promotional policy formulation.",

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T2 - Role of Third Country Effects

AU - Arogundade, Sodiq

AU - Mduduzi, Biyase

AU - Eita, Hinaunye

PY - 2022/6

Y1 - 2022/6

N2 - This study examines the impact of third-country effects on the locational choice of multinational enterprises (MNEs). The study used a spatial econometric model on a panel of 33 SSA countries spanning 1996-2018. Our empirical results lend support to the substitution effect of FDI in the region. This means that FDI flows to a particular host country substitutes the FDI to other host countries in the region. The results further suggest that the motive of MNEs is characterized by export-platform. In addition to the evidence of spatial interdependence among SSA countries, our empirical findings show that there are both direct and spillover effects of FDI determinants. The study recommends that the host economy should consider the surrounding countries' characteristics in their FDI promotional policy formulation.

AB - This study examines the impact of third-country effects on the locational choice of multinational enterprises (MNEs). The study used a spatial econometric model on a panel of 33 SSA countries spanning 1996-2018. Our empirical results lend support to the substitution effect of FDI in the region. This means that FDI flows to a particular host country substitutes the FDI to other host countries in the region. The results further suggest that the motive of MNEs is characterized by export-platform. In addition to the evidence of spatial interdependence among SSA countries, our empirical findings show that there are both direct and spillover effects of FDI determinants. The study recommends that the host economy should consider the surrounding countries' characteristics in their FDI promotional policy formulation.

KW - and Sub-Saharan African Countries

KW - Export Platform

KW - Foreign Direct Investment

KW - Spatial Econometrics

KW - Third-country effect

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Determinants of Foreign Direct Investment in Sub- Saharan African Countries: Role of Third Country Effects

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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