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

35 Pages Posted: 27 Jan 2015

See all articles by Birte Pfeiffer

Birte Pfeiffer

German Institute of Global and Area Studies (GIGA)

Holger Görg

University of Kiel

Lucia Perez-Villar

University of Kiel

Date Written: December 15, 2014

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.

Keywords: foreign direct investment, productivity, South–South firms, spillovers, sub-Saharan Africa

Suggested Citation

Pfeiffer, Birte and Görg, Holger and Perez-Villar, Lucia, The Heterogeneity of FDI in Sub-Saharan Africa – How Do the Horizontal Productivity Effects of Emerging Investors Differ from Those of Traditional Players? (December 15, 2014). Available at SSRN: https://ssrn.com/abstract=2555547 or http://dx.doi.org/10.2139/ssrn.2555547

Birte Pfeiffer (Contact Author)

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

Neuer Jungfernstieg 21
Hamburg, DE D-20354
Germany

Holger Görg

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany

Lucia Perez-Villar

University of Kiel ( email )

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