FDI in Sub-Saharan Africa: A longitudinal perspective on location-specific factors (2003–2010)

This paper examines the characteristics of Location Specific Factors (LSFs) in Sub-Saharan Africa (SSA) regarding inward Foreign Direct Investment (FDI) by Multinational Enterprises (MNEs). Exploratory Factor Analysis (EFA) of 758 MNEs in 2003, 1216 in 2005 and 2402 in 2010 is used to compare the variability in LSFs in ten, 15 and 19 SSA countries respectively. We find firstly the most powerful factors, influencing the political-economy and trade dynamics of hosts to FDI, stable over time. Secondly, by 2010, production inputs become the most important factor for FDI followed by political-economic stability. This result reflects findings in International Business (IB) literature. Policy implications point to unwavering need by SSA to reduce transaction costs for FDI; increase the predictability of the policy environment; and increase the productivity-adjusted cost efficiency of inputs.