Determinants of FDI in Africa: The role of agglomeration in Africa´s performance of attracting FDI

Abstract: Abstract Acknowledging the macro- and microeconomic importance of foreign direct investment (FDI), this paper aims at examining the determinants, in particular how the agglomeration forces determine the inward FDI in Africa. A comprehension of these determinants is important in order to maintain the positive development and improve the performance of attracting FDI in Africa. Results from my cross-country regression estimations from 2008 to 2016 suggest that: (i) the inward FDI in Africa can be explained by combinations of variables market size, economic stability, openness and agglomeration; (ii) there is a positive correlation between market size and the inward FDI; (iii) agglomeration has positive impact on the inward FDI; (iv) Western and Middle Africa attract less FDI, whist southern African affiliation is positively correlated with the inward FDI.