Why Does Foreign Direct Investment Go Where It Goes?: 

New Evidence From African Countries

John C. Anyanwu

The central concern of this paper is to respond to the question: why do
FDI inflows go where they do in African countries? An understanding of such factors will assist African policymakers to formulate and execute policies for attracting FDI. Our estimation results from cross-country regressions for the period 1996-2008 indicate that: (i) there is a positive relationship between market size and FDI inflows; (ii) openness to trade has a positive impact on FDI inflows; (iii) higher financial development has negative effect on FDI inflows; (iv) the prevalence of the rule of law increases FDI inflows; (v) higher FDI goes where foreign aid also goes; (vi) agglomeration has a strong positive impact on FDI inflows; (vi) natural resource endowment and exploitation (such as oil) attracts huge FDI; (vii) East and Southern African sub-regions appear positively disposed to obtain higher levels of inward FDI. The key policy implications
are discussed.

Key Words: Foreign direct investment; Factors driving FDI; African countries.
JEL Classification Numbers: F21, F23, O19.