n African Finance Journal - Infrastructure and the location of foreign direct investment : a case study of African manufacturing firms

Volume 16, Issue 1
  • ISSN : 1605-9786



The primary objective of this study was to examine the role played by the quality of infrastructure and firm heterogeneity on the amount and probability of being foreign invested using maximum likelihood techniques like the Probit and Tobit models. Results show that firm size and skilled labour have a positive and significant effect in attracting FDI, whilst firm age, unionisation and power outages have a negative and significant effect. The impacts of firm and location specific variables differ depending on whether we are looking at market seeking or export oriented FDI. This means that governments must create an environment conducive for firm growth and invest more into education, skills development and electricity infrastructure development if they want to attract significant inflows of FDI into the manufacturing sector.

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