Dependency Theory to the Study of Foreign Direct Investment (FDI) and Its Relevance to the Horn of Africa: A Matthew Effect?

Abstract

The central aim of the paper is to test the relevance of dependency theory in studying FDI and to achieve the main objective, the study employed qualitative case study design through dealing with wide ranges of secondary sources. The collected data were analyzed through thematic comparative analysis. This paper thus found out that the decreasing trade openness, low infrastructure development, macro-economic instability, low level of return on capital and exchange rate, increment of inflation rate proved that FDI in the horn of Africa has brought development inconsistency while a conspicuous profit and wealth for the affording states or institutions. Thus, dependency theory weighs more in explaining the relevance of FDI in the horn of Africa than its contemporary theories. Albeit, this paper counter argue the idea of dependency theory that foreign direct investment is wholly beneficial to Africa maintaining that a host state can achieve development incorporating FDI. Keywords: FDI, Dependency theory, Horn of Africa, Matthew Effect DOI: 10.7176/IAGS/97-02 Publication date: October 31 st 2022