Determinants of inward foreign direct investment in the Ghanaian manufacturing sector

Abstract

This study investigates the determinants of foreign direct investment (FDI) in the Ghanaian manufacturing sector, using the Regional Project on Enterprise Development (RPED) dataset. The study adopts a binary logistic regression model in which the dependent variable, FDI, is expressed as a function of firm-level characteristics and location variables. The results of this study showed that firm size, capital requirement, skill intensity, labour cost, technological capability and unionisation of a firm’s workers positively affect FDI inflows. The results, however, revealed that firm age negatively affect FDI. We also found that the location and sub-sector of the firm influence FDI inflows. The main findings of this study are that, larger firms are more likely to attract FDI in the manufacturing sector. Also, firms with high capital base, skilled labour force, improved technological capability and unionised labour are often in the position to attract more FDI into the manufacturing sector.