DETERMINANTS OF THE WORLD INWARD FOREIGN DIRECT INVESTMENTS TO AFRICA

Ming Wang, California State University, Los Angeles

Published in

EUROPEAN JOURNAL OF BUSINESS RESEARCH
Volume 14, Issue 2, p43-50, June 2014

ABSTRACT

Although there has been much research regarding the world inward foreign direct investments (IFDIs) to African countries, there is a lack of empirical evidence to support the claim that the world IFDIs to Africa have been heavily influenced by African economic factors or natural resources. This paper conducts an empirical study to investigate the key determinants of the world IFDI flow and IFDI stock to African countries in aspects of types of African economic factors or natural resources. The paper tests eight hypotheses using official data collected from U.S. Government Energy Information Administration (EIA), International Monetary Fund (IMF) and the United Nations World Investment databases. The results suggest that of the world IFDI flow and IFDI stock to Africa are driven by economic factors, but not natural resources. GDP and population of African countries are identified as key determinants of IFDI flow and only GDP is identified as a key determinant of IFDI stock to African countries. The study also indicates the world IFDI flow and IFDI stock are strongly correlated and heavily invested in some African countries with high GDP amount. The paper concludes with the research findings and implication of the research results and suggests the further research need to be done on main motives of these investments.

Keywords

Foreign direct investment, Africa and Economics


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