Uk Foreign direct investment in Ghana: determinants and implications.

The aim of this study is to empirically investigate the relative significance of the determinants of UK foreign direct investment (FDI) in Ghana. According to the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report in 2013, developing countries outperformed developed countries as recipients of FDI, and it is crucial that Ghana competes to increase its share in this positive trend. It is believed that Africa needs to target some countries and even some companies rather than adopt generic strategies if their promotional activities to attract FDI are to be effective. In Ghana’s case, one of the priorities to increase its share of FDI and subsequently that of Africa could be to reverse the declining trend of inward FDI from the UK, which was Ghana’s leading source of FDI until recently. By applying the OLI paradigm in the context of UK FDI to Ghana, the study provides a template of how FDI from a particular country may be attracted by analysing the determining factors from the perspective of companies already experienced in the market. This study adopted explanatory mixed research method in accordance with the pragmatic research philosophy. This enabled all the 286 contactable UK companies in Ghana to be reached through the survey method. Then based on the initial analysis of 101 usable responses in SPSS, representing 35 per cent response rate, eight sequential interviews were conducted through convenience sampling. The interviews were deductively analysed by manually categorising the responses according to the questions asked, in order to build explanations of the survey findings. Consistent with the OLI paradigm, the research revealed that all the surveyed companies possess ownership advantages such as strong brands, or the potential to develop strong brands, unique products, management and marketing know-how and transferrable experience from similar markets, all of which are crucial for successful investment in Ghana. However, for Ghana to retain UK companies in the country and attract more, favourable locational factors identified in the study need to be provided and nurtured. These include reliable infrastructure, enhanced market size, political stability and continuity, opportunities for agglomeration and a functioning regulatory framework which augment different degrees of internalisation, as the majority of the companies have preference for the wholly owned subsidiary entry mode. The study also found the effect of current tax incentives, formal institutions and informal ties in attracting and retaining FDI was insignificant. This research has made a unique contribution to the understanding of the determinants of FDI in a number of ways. In practice, the sample is unique as it excluded companies operating in traditional natural resources and therefore outside the jurisdiction of the Ghana Investment Promotion Centre (GIPC) according to the GIPC Act 478 of 1994. This makes the findings specific and relevant to GIPC and investment promotion agencies in Africa, regarding crucial factors to be highlighted and to abolish practices which do not add value to the country as the preferred investment destination for UK companies. Academically, this study fills a number of gaps in the literature. First, it was unique in examining the variables to be considered in retaining as well as attracting FDI, as the majority of studies on determinants of FDI focus more on attraction and less on retention of existing companies, despite the crucial role existing companies play in agglomeration, urbanisation, brand development and other benefits of FDI. The framework developed from this study may also be adopted or modified for future studies. Methodologically, another contribution is the application of explanatory mixed research methods to empirically study the determinants of FDI in Ghana.