Foreign Direct Investment, Institution and Industrialisation in Sub-Saharan Africa

Abstract

Empirical studies have been conducted around the impact of foreign direct investment on industrialisation; however, while they have produced inconsistent inferences, the impact channel of this relationship has also been ignored. This study focuses on the role of institution on foreign direct investment for industrialisation in a panel of 43 Sub-Sahara African countries for the period 1996 through 2018. This study uses manufacturing value added per capita to capture industrialisation and based its empirical evidence on the pooled ordinary least squares, fixed effects and system generalised method of moments methods of estimation. From our empirical analysis, the following findings are established: First, persistence level of industrialisation determines to a large extent, the current industrialisation in sub-Saharan Africa. Second, foreign direct investment exerts a negative and significant impact on industrialisation. Last, when indicators of institution are imposed on foreign direct investment in our model, the negative impact existing between foreign direct investment and industrialisation remains apparent except for the political index of institution that moderates and averts this negative effect although the magnitude is meagre. On the policy ground, this study advocates for institutional policies and reforms that targets economic, political and institutional forms of governance.

The political implication of women and industrialisation in Africa

“…This precarious situation of industrialisation in the continent has prompted a strand of research attempting to explain the determining factors of industrialisation. Inter alia, the documented factors are also economic (Kaya, 2010;Beji and Belhadj, 2014;Gui-Diby and Renard, 2015;Efobi et al, 2019;Asongu and Odhiambo, 2020;Nkemgha et al, 2021;Müller, 2021) and institutional (Beji and Belhadj, 2014;Oduola et al, 2021;. Among the reasons for the low industrialisation drive in Africa, Beji and Belhadj (2014) identified poor institutional qualities including high levels of corruption.…”

Does Education Affect Economic Growth? A Re-Examination of Empirical Data from China

“…The results show that foreign investment and government intervention have a significant role in promoting China's economic growth and a negative spillover effect on neighboring regions' economic growth. Foreign investment facilitates economic and trade exchanges between countries worldwide and introduces advanced management experience while promoting inter-regional competition and cooperation, which significantly contributing to economic efficiency [39,40]. The negative spillover effects of foreign investment and government intervention further indicate that China's degree of regional competition is relatively high and the cooperation is insufficient.…”

“…Foreign investment has a positive effect on regional economic growth with spatially significant spillover effects. Regional economic growth is promoted in different ways, such as accelerating domestic technological progress, introducing advanced management experience, and technology spillover through foreign investment [39,40].…”

Realizing sustainable development goals in sub‐Saharan Africa: The role of industrialization on consumption‐based carbon emission

“…Similarly, Oduola et al (2022) have shown that industrialization in G7 countries has little to no effect on carbon emissions. These conclusions further support the EKC theory, which argues that developed countries pay more attention to climate issues than developing countries.…”