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

Abstract

This study aims at establishing the role that inward foreign direct investment (FDI) and institutions played in the industrialisation process of 40 sub-Saharan African countries, over the period of 1996 through 2015. The study used a fixed effect method (FEM) of estimation for the analysis of data which was sourced from the world development indicators (WDI) database of the world bank and the world governance indicators (WGI) database, also of the world bank. The findings of the study based on the model employed show that inward FDI played a neative role in the industrialisation process of the countries under study. That is to say FDI was detrimental to industrialization. Institutions were however important in the promotion of the manufacturing sector of these countries. Good institutions provide a good business climate that enable the growth of the industrial sector of Sub- Saharan African countries. Other findings from the study showed that Agriculture and Export had a negative relationship with Industrialization, whereas, Imports had a positive relationship with Industrialization.