Institutional Capacity, Trade and Investment in African Economies

Diverse African economies have made efforts to integrate their economies into international trade and investment networks as a result of intensified globalisation. This chapter investigates the changing trade and economic performance of African economies and the influence which institutional capacities in different host economies have on the country's economic performance. It focuses on the role of institutions and their respective influence on trade and investment performance within African host countries. The chapter discusses the impact of institutional quality on inward foreign direct investment (FDI) flows in the studied African economies and sets out the framework and data used to empirically estimate the relationship between institutional quality and FDI. The role of FDI in economic growth within Africa has received significant attention in academic and policy research. Established academic research on the contribution of FDI towards economic growth has focused on the impacts as well as determinants of FDI in the economic growth of developing economies.