The Influence of German Development Cooperation on Foreign Direct Investment Decisions of German Investors

This study critically examines the relationship between the neo‐liberal economic ideas about development cooperation, overseas development assistance and foreign direct investment (FDI). Specifically, it explores how Germany's neo‐liberal Marshall Plan with Africa influences the investment decisions of German companies in Africa. The analysis is based on in‐depth semi‐structured key informant interviews conducted with German companies, business associations and development cooperation institutions active in Côte d'Ivoire—one of the largest French‐speaking countries in Africa. This paper introduces reputational and network effects of development cooperation on FDI into the mainstream international business literature. This contribution is illustrated by showing how the reputational and network effects of development cooperation provide a clear signal to the German firms an improved image of the host country due to its reform partner status. The study also extends the development economic view that new forms of development cooperation can significantly impact FDI. It further contributes to the location‐specific factors within the entry strategy literature by suggesting that development cooperation and a country's reputation are critical in shaping firm‐level decisions and government policy for most emerging economies seeking to attract FDI.