What Drives Foreign Direct Investment in Africa? An Empirical Investigation with Panel Data

This paper analyzes factors that drive foreign direct investment (FDI) in Africa. To do so, for the first time in the literature, the paper uses 5‐year panel data and the system‐GMM technique over the period 1970–2009. The main results are as follows: (a) larger countries attract more FDI; (b) regardless of their size, however, more open countries, politically stable countries, and countries offering higher return to investment also attract FDI; (c) FDI inflows are persistent in Africa. This suggests that countries that manage to attract FDI today are likely to attract more FDI in the future.