Doe technological capabilities matter for Moroccan FDI location choice in African countries?

Abstract

Our paper investigates the effect of digital transformation and the technological capabilities of African countries on Moroccan foreign direct investment location choice, using the Networked Readiness Index (NRI). To this end, we used the estimation methods of FMOLS and EGLS (Cross-section SUR), with panel data of 14 sub-Saharan countries over the period 2007-2020. We concluded that the effect of technological capabilities on foreign direct investment location choice takes a U-shape quadratic form. However, the impact of digital transformation remains almost non-significant due to the positioning of African countries in the Average-trap. Our paper contributes to the literature framework by considering the three motivations of FDI, market-seeking, efficiency-seeking, and technology-seeking. Furthermore, we use the NRI index as an innovative and synthesised measure of technological capabilities and digital transformation. The study constitutes an insightful policy implication for decision-makers in charge of FDI attractiveness in host countries having average scores of technological capabilities.