Foreign Direct Investment and Industrial Performance in Africa
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Medwell Journals
Abstract
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The African region compared to other developing regions has been the most vulnerable as regards the impact of
foreign capital inflow on domestic industries performance. The flow of FDI is expected to result into improved
investment, technological capacities and acceleration of industrial performance in domestic firms. The study
examined how the flow of FDI to the African region has impacted the industrial performance of the region, using the
proxy of industry value added. The study made use of pooled data from forty three African countries within the
period 1996 and 2015.The method of analysis utilized for the study was the pooled OLS and the fixed effect leastsquare
dummy variable model, employed to estimate the impact of foreign direct investment on industrial
performance for the selected host countries. The study finds that foreign direct investment is statistically significant
in relation to industrial performance for host African countries; but it is dissatisfying that the expected desired
features of industrial performance, like increased domestic savings, investment, technology transfer and increased
domestic productivity which will result into reduction in high level of import have not been realized. It is therefore
recommended that the governments of host countries should put policies in place to encourage performance of
industries domestically, to enhance sustained market participation and share of local firms in host economies, such
that dependence on external financial borrowing could be reduced, and domestic investment incessantly increased
resulting in improved industrial performance of host countries.
Keywords
HG Finance