Determinants of Foreign Direct Investment in Sub-Saharan African Countries: Role of Third Country Effects

This study examines the impact of third-country effects on the locational choice of multinational enterprises (MNEs). The study used a spatial econometric model on a panel of 33 SSA countries spanning 1996-2018. Our empirical results lend support to the substitution effect of FDI in the region. This means that FDI flows to a particular host country substitutes the FDI to other host countries in the region. The results further suggest that the motive of MNEs is characterized by export-platform. In addition to the evidence of spatial interdependence among SSA countries, our empirical findings show that there are both direct and spillover effects of FDI determinants. The study recommends that the host economy should consider the surrounding countries' characteristics in their FDI promotional policy formulation.