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The Heterogeneity of FDI in Sub-Saharan Africa – How Do the Horizontal Productivity Effects of Emerging Investors Differ from Those of Traditional Players?

Author

Listed:
  • Birte Pfeiffer

    () (GIGA German Institute of Global and Area Studies)

  • Holger Goerg

    () (Christian-Albrechts-University Kiel)

  • Lucia Perez-Villar

    () (Christian-Albrechts-University Kiel)

Abstract

This paper analyzes the horizontal productivity effects of foreign direct investment (FDI) from industrialized and developing countries in 10 sub-Saharan African countries. We establish a unique data set by combining data from the World Bank Enterprise Surveys that allow us to distinguish between foreign investors from sub-Saharan Africa, Asia, Europe, the Middle East, and North Africa. We find strong evidence of horizontal productivity spillovers to domestic firms derived from foreign-firm presence. However, these effects are clearly dependent on domestic firms’ absorptive capacity. The largest productivity effects seem to be driven by investors from sub-Saharan Africa. Our analysis also shows that productivity effects differ according to the income level of host countries. Overall, the strongest productivity effects seem to materialize in lower-middle-income countries. These key findings emphasize the increasing importance of emerging investors, beyond the traditional players from industrialized countries, in sub-Saharan Africa.

Suggested Citation

  • Birte Pfeiffer & Holger Goerg & Lucia Perez-Villar, 2014. "The Heterogeneity of FDI in Sub-Saharan Africa – How Do the Horizontal Productivity Effects of Emerging Investors Differ from Those of Traditional Players?," GIGA Working Paper Series 262, GIGA German Institute of Global and Area Studies.
  • Handle: RePEc:gig:wpaper:262
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    foreign direct investment; productivity; South–South firms; spillovers; sub-Saharan Africa;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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