The effect of colonial legacies on Africa’s inward FDI: the case of UK FDI in Ghana

Abstract

Purpose The purpose of this paper is to examine the role colonial ties play in attracting foreign direct investment (FDI) to Ghana, several years after the official end of colonisation in the African continent. Colonisation left behind legacies of institutional framework, social ties and remnants of companies of colonial masters, which could potentially offer contemporary businesses from home countries the benefits of country of origin agglomeration. Design/methodology/approach This paper uses sequential explanatory mixed research design through 101 questionnaires and 8 interviews from the UK companies with FDI in Ghana. This approached enabled the initial quantitative results to be explored further through the qualitative data. Findings Colonial ties have limited influence on contemporary flow of FDI to Ghana, in spite of the institutional legacies between former colonisers and colonies. Majority of UK companies are influenced by agglomeration opportunities in general rather than country of origin agglomeration. However, country of origin agglomeration remains important to over a third of the companies surveyed. Research limitations/implications The sample was taken from the non-extractive industry in Ghana, and caution must be applied in generalising the findings. However, some universal issues concerning agglomeration and institutions are discussed. Originality/value Although there has been some research on colonial history and its impact on FDI in Africa, existing knowledge on bilateral relations is rather limited. Unlike previous studies, this research provides depth by examining colonial influence on FDI between two countries, using two key concepts: country of origin agglomeration and institutions. It provides UK companies with contemporary views to consider when exploring FDI opportunities in Ghana, particularly in relation to the effects of the colonial history. It also provides investment promotion agencies with empirical results on the importance of various forms of agglomeration and institutions for FDI attraction.