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Determinants of foreign direct investment inflows to COMESA member countries: an integration of institutional and socio-economic factors

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  • Hayelom Abrha Meressa

    (Assosa University)

Abstract

In developing economies, stable foreign direct investment inflow is used as a means of realization of private sector growth and sustainable development goals. However, there is variability in inflows to African region in general and its economic bloc groupings in particular overtime across countries. In this regard, numerous empirical studies have been carried out on the determinants of investment inflow variability using different datasets on developing countries despite the studies have produced paradoxical findings. The aim of this study is, therefore, to empirically identify factors that determine variability of foreign direct investment inflows to COMESA member countries using panel data estimators. The study used explanatory research design with arrangement of secondary data, ex post control over variables, unbalanced short panel inclined with quantitative approach. The data were acquired from world development and governance indicators of World Bank for a period of 15 years ranging from 2002 to 2016 for 17 countries. Econometric model estimation procedures and diagnostic tests for classical linear regression model assumptions were carried out before making valid analysis. Accordingly, empirical evidence of the study revealed that infrastructure, government effectiveness, economic growth, control over corruption, trade openness, political stability, human capital and financial development have statistically positive effect on the inflow. However, external debt, inflation and regulatory quality failed to show significant effect. Therefore, member countries should take measures to narrow-up bottlenecks of financial development, improve infrastructure, scale-up trade integration, improve human capital quality, work to bring better political stability and to control corruption in order to boost-up stable inflows.

Suggested Citation

  • Hayelom Abrha Meressa, 2022. "Determinants of foreign direct investment inflows to COMESA member countries: an integration of institutional and socio-economic factors," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-16, December.
    • Handle: RePEc:spr:joiaen:v:11:y:2022:i:1:d:10.1186_s13731-022-00262-z
    DOI: 10.1186/s13731-022-00262-z
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    Cited by:

    1. Johnson Adelakun & Kanayo Ogujiuba, 2023. "A Comparative Analysis of the Determinants of Foreign Direct Investment: The Case of Top Ten Recipients of Foreign Direct Investment in Africa," Economies, MDPI, vol. 11(10), pages 1-14, September.
    2. Scalamonti, Francesco, 2024. "The foreign investments-growth nexus in underdeveloped countries: the state-of-art of research analysing a selected and recent empirical literature (2020-2022)," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    3. Alpon Satrianto & Akmil Ikhsan & Evo Yunanda Dirma & Candrianto Candrianto & Egy Juniardi & Mia Ayu Gusti, 2024. "The Effect of Institutional Quality on Renewable Energy: Evidence from Developing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(5), pages 678-686, September.
    4. Alemayehu Geda & Addis Yimer, 2024. "What Drives Foreign Direct Investment into Africa? Insights from a New Analytical Classification of Countries as Fragile, Factor-Driven, or Investment-Driven," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 14199-14234, September.

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