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Industrialization, FDI and absorptive capacities: evidence from African Countries

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  • Sami Ben Mim

    (University of Sousse)

  • Abir Hedi

    (University of Sousse)

  • Mohamed Sami Ben Ali

    (Qatar University)

Abstract

This paper assesses the effect of foreign direct investment (FDI) on the industrialization of African economies. In particular, we address the nonlinearity issue and investigate the role of the recipient countries’ absorptive capacities as a catalyst of foreign investments' spillover effects. The empirical framework considers a panel of 46 countries over the 1998–2019 period. The SGMM estimates highlight a two-threshold relationship between FDI and industrial output. FDI should range between an upper and a lower bound to produce a positive effect on domestic industries. Our findings also suggest that weakly industrialized countries and countries endowed with high absorptive capacities are those taking advantage from the spillover effects generated by FDI. Finally, estimation results reveal that financial development, human capital, infrastructure and the legal framework are the main channels through which FDI contributes to promote the industrialization process in Africa.

Suggested Citation

  • Sami Ben Mim & Abir Hedi & Mohamed Sami Ben Ali, 2022. "Industrialization, FDI and absorptive capacities: evidence from African Countries," Economic Change and Restructuring, Springer, vol. 55(3), pages 1739-1766, August.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:3:d:10.1007_s10644-021-09366-0
    DOI: 10.1007/s10644-021-09366-0
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    More about this item

    Keywords

    FDI; Industrialization; Absorptive capacities; African countries;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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