Original scientific paper
https://doi.org/10.1080/1331677X.2019.1696691
The impacts of institutional quality and business environment on Chinese foreign direct investment flow to African countries
Dinkneh Gebre Borojo
Jiang Yushi
Abstract
This study examines the impacts of institutional quality and business
environment on Chinese foreign direct investment (F.D.I.)
flow to Africa. We derive aggregate indicators of institutional
quality and business environment using economic and governance
institutions, doing business, transport efficiency indicators
conducting a principal component analysis. We employ Poisson
pseudo-maximum likelihood (P.P.M.L.) procedure to estimate the
gravity model of F.D.I. flow as it can solve zero-valued observations
and heterogeneity problems. Our findings disclose that institutional
quality and business environment indicators are
significant motivators of Chinese F.D.I. flow to Africa. Our findings
are robust and similar after we account for endogeneity concerns
using an I.V. estimator. Based on our results, we conclude that
improvement in the business environment and the institutional
quality of African countries is key to spurring Chinese F.D.I. flow
to Africa.
Keywords
foreign direct investment (F.D.I.) flow; business environment; institutional quality Poisson pseudomaximum likelihood (P.P.M.L.) estimator; China; Africa
Hrčak ID:
254351
URI
Publication date:
9.2.2021.
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