Abstract
PurposeThe 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/approachThis 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.FindingsColonial 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/implicationsThe 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/valueAlthough 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.
Highlights
The effect of colonial legacies on Africa’s inward Foreign Direct Investment (FDI): The Case of UK FDI in Ghana
Consistent with the contention that context is crucial in critical international business (IB) research, we discuss these concepts in the context of Ghana
This is contrary to expectations, as it was anticipated that UK companies would invest in Ghana with the view to strengthen colonial and friendship ties (Bankole and Adewuyi, 2013), and to exploit country of origin agglomeration (Tan and Meyer, 2011)
Summary
Ghana was a British colony until 1957 when it became the first African country to attain independence (Adu, 2013; Jones, 2013; Mmieh, et al, 2012). The formal bilateral institution arrangement goes as far back as the colonial days and continues to have legitimacy through the Commonwealth, diplomatic relations and trade agreements These could potentially increase trade between the countries concerned due to reduction in risk and uncertainty attributable to relational trust among companies with social and colonial ties (Makino and Tsang, 2011; Tan and Meyer, 2011; Zhao and Hsu, 2007). Apart from formal institutions such as the bilateral treaties, there are informal ties which are developed through what Makino and Tsang (2011) refer to as unwritten rules They argue historical ties such as colony-coloniser relationship can play a positive or negative role in attracting trade and investment, depending upon how the historical relationship is perceived. In the form of demand for UK products and services regardless of FDI mode cri
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