Foreign Capital and Local Aspirations: The Employment and Entrepreneurial Effects of China’s OFDI in Ghana

This study investigates the impact of China’s outward foreign direct investment (OFDI) on employment and entrepreneurial activity in Ghana using sector-level panel data from 2000-2024. Employing a two-way fixed-effects model, the analysis controls for unobserved sectoral heterogeneity and macroeconomic shocks while testing mediation, moderation, and threshold effects. The results show no robust direct effect of China’s OFDI on employment or entrepreneurship once structural controls are included. Mediation analysis further reveals that productivity and knowledge do not serve as effective transmission channels for OFDI, indicating limited spillover effects. While knowledge positively influences employment, it is not generated by Chinese investment. Moderation results provide weak evidence that ease of doing business conditions strengthen OFDI effects, while cultural distance is not identifiable under fixed effects. Threshold analysis shows no significant nonlinear effects across productivity regimes. Overall, domestic factors particularly trade openness, infrastructure, and institutional quality are more important determinants of labour-market and entrepreneurial outcomes than China’s OFDI in Ghana.