E-government’s role in enhancing foreign direct investment to sub-Saharan African countries: An application of system GMM

Abstract

In recent years, the provision of government services through electronic platforms has significantly increased due to the rapid development of digital technologies. The significant shift in digital governance is expected to have an effect on key macroeconomic variables through its speed, efficiency, and convenience. Therefore, this study empirically evaluates the effects of e-government development on foreign direct investment inflows by targeting sub-Saharan African (SSA) countries. The study covers the panel data of periods 2003–2022 for 44 SSA countries. The data were analyzed using both descriptive and econometric techniques with STATA 17 software. According to the System GMM model used in the study, e-government is a significant factor that positively affects FDI inflows, and scale neutral that significantly benefits both less growing and more growing economies. Furthermore, the result from threshold analysis shows that the positive effect of e-government on FDI inflows is influenced by the development of telecommunication infrastructure. The key insight for policy arising from this paper is that in addition to the macroeconomic factors, FDI inflows are affected by digital transformation and technology-augmented government services. Therefore, development interventions should emphasize the improvement of such institutional and technological systems to enhance FDI inflows to the region.

Keywords:

• e-government
• e-participation
• FDI inflows
• digital transformation
• online service index
• System GMM

Acknowledgements

We would like to thank Gondar University for granting us the research budget and other financial support while conducting this research work. We also would like to extend our gratitude to the Head of the School of Economics, Yibeltal Walle (PhD) for the moral support and provision of necessary facilities. Likewise, our gratitude goes to Daria Gustova for using her master’s dissertation thesis as a reference.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the University of Gondar.

Notes on contributors

Getahun Tolossa Adugna

Getahun Tolossa Adugna: Currently, a PhD candidate at the University of Gondar, School of Economics, earned his MSc Degree in Development Economics at the Adama Science and Technology University in 2014 and has been working as Lecturer at Madda Walabu University, Department of Economics. Email: [email protected]. P.O.B: 196 Gondar

Wondemhunegn Ezezew Melesse

Wondemhunegn Ezezew Melesse: Earned his PhD in Economics at the University of Ca’ Foscari, Venice, Italy, in 2016 and has been teaching and researching with Associate Professor academic rank at the University of Gondar, Ethiopia since then. Email: [email protected]

Yinges Alemu Muche

Yinges Alemu Muche: Earned his PhD in Economics and statistics at the Moscow Institute of Economics and Statistics in 1996 and has been working in different Academic positions (including Vice president for Business and Development), teaching and researching with Associate Professor academic rank at the University of Gondar, Ethiopia since then. Email: [email protected]