FDI location characteristics of MNEs location decisions in the Ghanaian banking sector

Abstract

Foreign Direct Investment (FDI) is a significant source of capital for economic growth in developing countries. The increasing financial links across countries, especially between industrial and developing countries have been associated with the liberalization of international financial markets. Moreover, globalization in production, due to technological innovations in communications and transport coupled with better policies in developing countries, are often considered to be the primary forces that drove globalization and foreign direct investment in the 1990s and recent times. The literature on FDI can be categorised into three main groups: the first group investigates the effect of FDI on macroeconomic indicators, such as economic growth, exchange rate, rate of inflation, balance of payments, and rate of unemployment. The second group examines the impact of FDI on different factors such as technology transfer to recipient countries, management practices by national firms, and labour skill and productivities in hosting countries. The third group focuses on the characteristics of FDI and the driving forces for its inflows and outflows to different countries. This research focuses on the latter strand thereby enabling an investigation of the location characteristics of MNEs location decision in the banking sector. The main aim of this thesis is to examine and analyse FDI location characteristics in the Ghanaian banking sector. This has been achieved by making use of both qualitative and quantitative data series’ to ascertain whether the major location factors are the characteristics/determinants of MNEs location decision in relation to a specific industry (banking) and a specific country (Ghana). Using a multimethod approach, the findings of this thesis reveal that political and legal factors are very significant, followed by macroeconomic policy factors and infrastructure factors. Market factors and labour market factors which have been found in previous studies (Lall 2001; Asiedu; 2003; Dunning 2004; Helpman; 2006 and Felbermayr et al. 2011) to be important determinants of FDI inflows have been found in this thesis to be the least important factors for MNEs’ location decision in relation to FDI inflows to Ghana.