Neighbourhood Effects and FDI Location: the Role of the Ability to Source Inputs

Abstract This paper aims to show, in the African context, that the ability to source inputs from neighbouring countries increases the attractiveness of African countries. Using a methodology based on spatial econometrics, the SLX and SDEM models are applied to a panel of 24 African countries over the period 2004–2015. It appears that the location of FDI in a country is affected by the capacity of its neighbours to provide inputs, particularly in terms of natural resources and economic openness. Moreover, domestic supply chains also affect the location of FDIJEL classification: F29, F21, C31