Mobile Telephony and Economic Growth in Africa

This article analyzes the impact of mobile telephony on economic growth in Africa. It uses panel data on 36 African countries over the period 1995 to 2010, and estimates an econometric model made up of two equations–one expressing output as a function of mobile telephony, and the other, a demand function, reflecting the possibility of a reverse causation from the former to the latter. Given the importance of telecommunication in the development process and the dire state of fixed‐line telephones in Africa, the explosive growth in mobile telephony on the continent could potentially contribute to addressing some of the important challenges it faces today, including the lack of robust economic growth and of poverty alleviation. Employing panel data estimation procedures, this study finds evidence that supports the view that increased mobile penetration contributes to the growth rate of real gross domestic product (GDP). However, the increase in mobile telephone use was not found to have been significantly influenced by GDP growth. © 2014 Wiley Periodicals, Inc.     

FDI and Financial Market Development in Africa

The literature on the relationship between foreign direct investment (FDI), financial market development (FMD) and economic growth focuses mainly on two aspects: the relationship between FDI and economic growth, and the role played by FMD in that linkage. The literature is almost silent on the relationship and the direction of causality between FDI and FMD. Although it has been established that FDI contributes more to growth in countries with a more developed financial market, it is not clear how FDI and FMD interact with each other. The aim of this paper is to fill this gap in the African context. Particularly, in Africa, where stock markets experience low liquidity and less transparency, FDI can be an impetus for financial market reforms and serve as a mechanism to improve the transparency and the depth of the financial markets. Also, well‐functioning financial markets can help channel foreign investments more efficiently into productive sectors, and therefore create more value for investors, hence making the countries more attractive to FDI. In short, both FDI and FMD will impact each other simultaneously, which is confirmed by our findings. We document a bidirectional causality between FDI and FMD. Furthermore, the multivariate regression results of the system of simultaneous equations also confirm the positive relationship between FDI and FMD in Africa. We also find that FDI contributes to economic growth in Africa after controlling for endogeneity between FDI, FMD and economic growth.     

Foreign Direct Investment in Africa: The Role of Natural Resources,Market Size,Government Policy,Institutions and Political Instability

Data from several investor surveys suggest that macroeconomic instability, investment restrictions, corruption and political instability have a negative impact on foreign direct investment (FDI) to Africa. However, the relationship between FDI and these country characteristics has not been studied. This paper uses panel data for 22 countries over the period 1984–2000 to examine the impact of natural resources, market size, government policies, political instability and the quality of the host country's institutions on FDI. It also analyses the importance of natural resources and market size vis‐à‐vis government policy and the host country's institutions in directing FDI flows. The main result is that natural resources and large markets promote FDI. However, lower inflation, good infrastructure, an educated population, openness to FDI, less corruption, political stability and a reliable legal system have a similar effect. A benchmark specification shows that a decline in the corruption from the level of Nigeria to that of South Africa has the same positive effect on FDI as increasing the share of fuels and minerals in total exports by about 35 per cent. These results suggest that countries that are small or lack natural resources can attract FDI by improving their institutions and policy environment.     

Volatilities in emerging MENA stock markets

This article examines the interrelationships among the emerging stock markets of the Middle East and North Africa (MENA) region, as well as the relationship between each MENA stock market and the larger and more developed markets of Europe and the United States. It explores whether MENA stock markets can offer international investors unique risk/return characteristics to diversify international and regional portfolios. This study adds to the existing literature by focusing—for the first time— on the dynamic relationships in the volatilities of the returns in MENA stock markets. The econometric part of the article uses the causality‐in‐variances GARCH model, the TARCH and ARCH‐M models, and VAR analysis to model conditional volatilities in stock market returns and the dynamic responses of volatilities to innovations in conditional variances. © 2006 Wiley Periodicals, Inc.     

Political risk assessment by multinational corporations in African markets: A Nigerian perspective

Political risk assessment (PRA) is one of the determinants of foreign direct investment (FDI) and the competitiveness of multinational corporations (MNCs), yet little is known about its use in African markets. This study critically investigates the PRA techniques used by MNCs in Nigeria and their applicability. It uses a multimethod approach to analyze data collected from MNCs and the data set of the International Country Risk Guide (ICRG) PRA annual rating for Nigeria from 2011 to 2015. The findings reveal that most firms use qualitative, rather than quantitative, PRA techniques. Regional variations in the outcome of PRA within Nigeria could also contribute to the low use of quantitative techniques. This article identifies that firms are prepared to invest in Nigeria, in spite of high political risk, due to its economic and financial attractiveness. This article's findings offer some implications for practice with some suggestions on how it could influence firms’ internationalization and their conduct of PRA.     

Cross‐border expansion and competitive interactions of indigenous mobile network operators in sub‐Saharan Africa

Emerging‐market multinational enterprises (EMNEs) have become major players in the global economy, with an increasing share of global foreign direct investment (FDI). Indigenous mobile network operators (MNOs) in sub‐Saharan Africa (SSA) are not left out in this pursuit, as they seek growth and competitiveness beyond their domestic markets. We investigate the FDI location choices and competitive interactions of the five indigenous SSA MNOs that had internationalized as of 2014 and find that, contrary to the literature, these EMNEs, operating in a key and rapidly developing industry, did not tend to commence their cross‐border expansion in geographically close markets. In addition, the MNOs are more likely to invest in countries with stronger control over corruption and do not appear to engage in heavy head‐to‐head competition with their rivals. These findings contribute to the internationalization literature in the context of the investment and competitive behaviors of the currently underexplored indigenous SSA multinationals.     

Entering the last frontier: expansion by US multinationals to Africa

Literature on multinationalism, even that which focuses on economic development and incentives for foreign direct investment (FDI), largely ignores the African continent despite its market of over 700 million inhabitants and its unique challenges for foreign firms. However, the African continent provides an important arena for examining the effects of infrastructure, wealth, and political differentials across countries and the effects of these variables on the expansion decisions of US multinational corporations (MNCs). In this paper we examine the US stock market reaction to announcements of US firms entering African markets through both FDI and Non-FDI modes. Finally, we investigate the accounting performance implications of these expansions. Our results show that, on average, firms experience negative wealth effects when expanding to Africa. Further analysis shows that expansions to South Africa produce losses, while expansion to the rest of Africa produce positive gains. We also show that firms with higher return on equity perform better than firms with lower return on equity when they expand to Africa in countries other than South Africa.     

The Transformation of International Telecommunications

This article starts by identifying the key elements of the antiquated system which has ensured that prices for international telephony have stayed high even though costs have fallen sharply. It then explains why and how that system, built on bilateral relationships between telecommunications companies (telcos) which were formerly monopolies, is now being undermined. The authors conclude that international customers of telcos can look forward to massive price cuts in the near future and that this will make it possible for world-wide communications across disparate operations to expand even faster than before. The telcos themselves must face up to (i) rapidly falling profits from what has been a cash cow and (ii) the strategic dilemma of whether to hold out against change or to roll out new services to compete with new entrants and the new service options opened up by technological advance.     

Analysis of government policies,institutions, and inward foreign direct investment: Evidence from sub‐Saharan Africa

This article examines the effects of government policies and institutions on foreign direct investment (FDI) inflows in sub‐Saharan African context using both quantitative and qualitative approaches. On the quantitative approach, we analyzed the effects of institutions on FDI using two statistical techniques—canonical cointegration regression (CCR) and fully modified ordinary least square (FMOLS)—over the period of 1984–2012. We find that political instability, democratic accountability, and investment risk have significant impact on inward FDI in Nigeria. Using a trend analysis, our results provide evidence to suggest that liberal government investment policies have positive influence on FDI inflows. Our qualitative analysis over the 1962–2012 period supports the results of the quantitative analysis.     

New exports matter: Discoveries,foreign direct investment and growth,an empirical assessment for Middle East and North African countries

Export diversification has become a priority goal for the development of the Middle East and North African (MENA) countries. In this article, we aim at measuring both the effects of exports' diversification on growth in MENA countries and the way new exports and foreign direct investment (FDI) interact with each others in the process of growth. Although the effects of FDI on growth have been scrutinized by numerous studies up to now, the effects of diversification and discoveries in export have only very recently been assessed. But no one has made explicit the way FDI and export discoveries interact in the growth process. A model is estimated by the system-generalized method of moments and we provide robust evidence that export discovery and FDI stimulate gross domestic product (GDP) growth in our sample of countries, and that FDI does not necessarily have the same effect on growth according to the level of discovery of the country. We also show that the joint positive effect of new exports and of imports suggest that technological spillover from import but also from the integration to global value chains are likely to occur in our sample of countries.     

Why on Earth Should Foreign Banks Invest in Africa's Financial Services Sector? Evidence from Financial Multinationals in Ghana

While sub‐Saharan African countries have been able to attract some degree of resource‐seeking foreign direct investment (FDI) due to their abundant natural resources, financial FDI inflows have proved to be elusive for the region, in spite of the widespread financial‐sector adjustment programs that offer attractive incentive packages for financial multinational corporations (MNCs). Literature surrounding the determinants of FDI inflows has mainly focused on manufacturing and real production activity. We analyzed the root causes of the weak administrative and institutional framework in Africa's banking industry, using Ghana as a case in point. Focusing on two financial MNCs as case studies, this article validates the significance of a thorough qualitative investigation in evaluating the explanations as to why most foreign banks do not invest in sub‐Saharan Africa and why the few that do have relatively insignificant operations. The study also reveals that despite the far‐reaching reforms, there are several structural constraints and deficiencies placed on financial MNCs that affect the size of the business they can conduct and their future investment decisions. One of the major issues prior to the financial‐sector reforms in Africa was disintegration, and the restructuring was not designed to create an attractive location for foreign capital; hence, the low financial FDI inflows to Ghana in particular and Africa in general. © 2015 Wiley Periodicals, Inc.     

Does foreign direct investment promote institutional development in Africa?

Foreign direct investment (FDI) inflows into Africa have increased since the turn of the millennium, mainly due to FDI growth into African countries by multinational enterprises (MNEs) from developing economies. While African governments view this growth as a positive development for the continent, many governments in the West have raised concerns regarding the institutional impact of investments from developing economies. This paper examines the impact of FDI flows on institutional quality in African countries by distinguishing investments from developed versus developing economies. Previous empirical studies have found a significant relationship between FDI flows and institutional quality in African countries but regard the relationship as MNEs rewarding African countries for adopting institutional reforms. However, little attention has been paid to the reverse causality, i.e. that FDI can cause an institutional change in African countries. Using bilateral greenfield FDI flows between 56 countries during 2003?2015, we find no significant FDI effect from developed and developing economies on institutional quality in host countries. However, aggregate FDI flows from developed and developing economies have a significant positive effect on host country institutional quality but differ concerning the impact's timing. In contrast, we find no significant effect of FDI flows from China on host country institutional quality. Our results are robust to alternative measures of institutional quality.     

Following the money: The globalization of capital flows and private equity

Global capital flows have long been the domain of the developed nations. The emerging markets, at best, have been nominal players. Today, the tables have begun to turn. The developing nations have become bigger players as global growth increasingly shifts toward the Middle East, Asia, Central Europe, and Latin America. Accordingly, global capital flows are slowly being reconfigured; in the future, flows will increasingly take the form of north‐south movements, or flows between the developed and developing nations. They will also become south‐south in nature, as well as south‐north. Private equity, long driven by U.S. players, will become less U.S.‐centric in the future. © 2008 Wiley Periodicals, Inc.     

Does Foreign Direct Investment Promote Exports? Evidence from African Countries

This paper empirically examines the effect of foreign direct investment (FDI) inflows on exports in Africa. Using the system‐generalised method of moments estimator for linear dynamic panel data on a sample of 53 African countries and five‐year periods from 1970 to 2009, the paper finds that higher FDI inflows are positively and significantly linked with higher exports of goods and services. A large part of the FDI effect is driven by its spillover effects on exports. The paper also finds the lagged value of exports, a competitive currency, as well as increases in domestic investment and physical infrastructure, to be factors stimulating African exports.     

FDI and Welfare Dynamics in Africa

This article examines the welfare impact of foreign direct investment (FDI) in a panel of 20 African countries over the period 2000–2013. We explore the multifactor and nonmonetary measures of welfare and the nonlinear effect of FDI on welfare. We used the Driscoll and Kraay standard errors and augmented mean group (AMG) estimator by Eberhardt and Teal (2010) to account for cross‐sectional dependency, endogeneity, and heterogeneity within panel units. The results indicate that although FDI is welfare enhancing, the nonlinear terms report mixed findings. When a multifactor indicator is employed, the increase in the nonlinear term is lower than the linear part. However, there is strong evidence that FDI is ultimately welfare enhancing when a nonmonetary indicator is employed. From an international business perspective, the findings have unlocked the welfare effects of international business on African host economies. International businesses through FDI can enhance welfare in Africa countries. However, the optimal efficacy of FDI‐welfare impact differs across the various dimensions of welfare. © 2017 Wiley Periodicals, Inc.     

African Women in the Entrepreneurial Landscape: Reconsidering the Formal and Informal Sectors

Informal and formal sectors can be seen as “dual economies” of African countries. This article discusses the entrepreneurial landscape in Africa considering both sectors, as well as the continuum from small to large within each. It queries whether there can be mobility within and between sectors and whether upward movement, as seen elsewhere, is possible for most African entrepreneurs. The landscape displays the range of women entrepreneurs from traditional microenterprises to large informal-sector traders, from small- to large-scale formal-sector companies, as well as emerging globalists (the “new generation of African entrepreneurs”). Paradigms compare and contrast these entrepreneurs in terms of demographic variables, types of typical enterprises and companies, product sources and markets, start-up capital, networks and associations, and mobility within and between the sectors. Findings show the informal?formal distinction is useful to disentangle the landscape, but that movement between informal sector categories is not substantial because of the entry requirements of education, capital, business networks, etc. Similarly, within the formal sector of small to large businesses, limited access to capital, networks, market niches, and product innovation hinders upward mobility for most. The new generation of African entrepreneurs form an endpoint of the continuum because their global business methods, networks, financial transparency, and business ethics propel them to success. Hence, while most African women entrepreneurs are lower on the scale, there is a growing cadre of women at the top who provide role models of achievement within their countries.     

Financial Development and Economic Growth in Africa

We revisit in this paper the debate between financial development and economic growth. In contrast to previous studies examining banking related measures, we focus on the capital account and the depth of African stock markets. We examine 15 African countries from 1995 to 2010 and employ both static and dynamic panel data methods. While the former suggest weak results overall, portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization. These findings reinforce the view that African countries should open their equity markets to international investors and encourage FDI.     

The global financial crisis,financial linkages and correlations in returns and volatilities in emerging MENA stock markets

The 2007 United States financial crisis has developed into the most severe worldwide economic crisis since the 1927 Great Depression. In addition to its severe repercussion in North America and the European Union, the crisis has put pressure on emerging markets in general, and the Middle East and North Africa region in particular. For a better understanding of how the crisis affected the MENA region, we focus in this paper on the global and regional financial linkages between MENA stock markets and the more developed financial markets, and on the intra-regional financial linkages between MENA countries' financial markets.     

Introduction to the Special Issue: Management in Africa in the Global Context 1

ABSTRACT

The primary focus of this introductory article is to provide a synoptic peek into the challenges and opportunities facing the countries of Africa in today's global economy and in their attempts to develop their national economies to achieve what is commonly termed the Millennium Development Goals. While foreign direct investment (FDI) is seen as a way to attain these goals, FDI flows to African countries remain extremely low. If Africa is to attract diversified FDI inflows, not just those focused on extractive/natural resources, African countries need to develop a system of management that is effective and efficient, internationally oriented and nationally focused, culturally inclusive and institutionally supportive and reliable, and one that promotes business growth and economic development with a sense of social responsibility.     

Super‐Connectors: A New Model of Internationalization from the MENA Region

The main purpose of this case‐based research is to investigate and analyze three fast‐growing airlines (Emirates/Dubai, Qatar Airways/Qatar, and Etihad Airways/Abu Dhabi) and their internationalization from the Middle East and North Africa (MENA) region. The three carriers that are commonly known as “super‐connectors” in the airline industry continue to excel in their business models and internationalization. Based on secondary data, surveys, and company‐specific information, the article uses a longitudinal case‐based research approach to discuss the three airlines. Findings of the work reveal that the three super‐connectors have aggressively expanded in the MENA region and beyond by seeking multiple alliances, joint ventures, long‐term collaborative agreements (code sharing), and foreign direct investment (FDI). These activities represent innovative business models and operational efficiencies in the global airline industry. We believe that non‐MENA airlines may not have the same dynamism, strategic clout, corporate‐related efficiencies, and financial prowess that we witness among the three super‐connectors. In international business (IB) and multinational corporation (MNC)‐related areas, researchers, industry analysts, and policymakers need to pay attention to the MENA region's super‐connectors and their emerging internationalization models. The article also provides useful trends and implications that can be benchmarked by practitioners, researchers, and airlines regarding the issues of internationalization, growth, and new business models. © 2015 Wiley Periodicals, Inc.