Foreign Direct Investments (FDI) have long been recognized as a significant driver of economic growth and development in emerging markets (Fanglin and Risha, 2019; Adu-Danso and Abbey, 2020; Sun, 2011). The non-oil manufacturing sector in West Africa holds immense potential for fostering technological advancements through FDI. The non-oil sectors play a pivotal role in driving economic diversification and sustainable development. As countries in the region seek to reduce their dependence on oil exports and build more resilient economies, the non-oil sectors emerge as key drivers of growth, job creation, and technological advancement. Foreign Direct Investments (FDIs) have been growing in West African countries between the period 2012 – 2021 on an average of 5 – 8 % annually (IMF, 2021). FDI is necessary for every country to grow since it helps to inject extra capital to help stimulate production and manufacturing activities. Thus, FDI has long been recognized as a significant economic growth and development driver in emerging markets (Chen et al., 2015; Ricken and Malcotsis, 2018). The non-oil sectors mostly comprise Agriculture and Agribusiness, Manufacturing, Services, Mining and Minerals, and Construction among others (Adu-Danso and Abbey, 2012; Park and Tang, 2021). These non-oil sectors hold immense potential for fostering technological advancements, generating employment opportunities, and diversifying economies.
In West Africa, these non–oil sector firms encompass a wide range of industries, including textiles, food processing, electronics, machinery, and automotive. Additionally, Agribusiness involves processing, packaging, and exporting agricultural products, adding value along the supply chain. Furthermore, the services sector includes finance, telecommunications, tourism, education, and healthcare. Expanding service industries can lead to improved infrastructure, quality of life, and opportunities for skilled employment. Also, concerning minerals and mining, there are sectors such as sustainable mining practices for extra gold, diamond, and bauxite, that contribute to the mining sector. Most importantly, promoting manufacturing activities can lead to value addition, job creation, and technological advancements (Antwi et al., 2016). Policy implementation is critical for firms and businesses in West Africa to adapt to technological advancement through FDI (Chang et al., 2016; Huynh et al., 2019).
FDI channeled by investors brings with them advanced technologies, managerial expertise, and best practices from their home countries (Fu and Zanello, 2020). Technological advancement has supported developed countries with a huge impact on economic growth and development (Adzroe, 2015). The study from Nketiah-Amponsah and Sarpong (2019) noted that considering the growing inflows of FDI into non-oil sectors like Agriculture, Services, Manufacturing, and Infrastructure in countries like Ghana, Nigeria, Cote d’Ivoire, Senegal, Sierra Leone, Mali, and Burkina Faso. There has been a need for local manufacturing countries to capture and inculcate technologically advanced tools and resources in their local operations (Sarkodie et al., 2019; Atiase et al., 2020). Thus, countries such as Ghana and Nigeria between the period of 2016 – 2022 have received 15% increment in the FDI into the sectors of Agriculture and this in the long run has marginal been channeled into technological implementation. However, the adoption of tractors and equipment has seen wide adoption in the field of agriculture. The inflow of technologies can help upgrade local manufacturing processes, enhance product quality, and improve overall efficiency. The adoption of technological resources and tools in sectors such as agriculture, services, and manufacturing among others, have been evaluated to be in the lower stages. While Services have seen 25% adoption of technological activities between the period of 2015 and 2021. Other non-oil sectors have seen a massive boost in the inculcation of technology in operations. While the potential for technological advancement through FDI is huge, there is also the need to evaluate which areas of FDI can impact positively. Technology transfer through FDI has propelled the economies of different countries to much higher heights (Jibrilla and Dunusinghe, 2021). This has been one of the key factors of economic growth and development.
FDI often encourages research and development (R&D) in technological activities in host countries (Auffray and Fu, 2015). Collaboration between local research institutions and foreign investors can lead to technological innovations that address specific challenges faced by West African economies. This can foster a culture of innovation and entrepreneurship, further propelling the non-oil manufacturing sector. Technological advancements play a crucial role in driving economic development and shaping the trajectory of nations (Wako, 2018). The significance of technological advancements for economic development is multifaceted and far-reaching. Few have been ascertained; thus, local workers can benefit from skill development and training, which can have a long-lasting positive impact on the labor force (Seyoum et al., 2015). FDI comes with varied factors and resources. However, the ability to establish which among these factors can be absorbed locally and used for business manufacturing and production is critical for the economic growth and development of countries in West Africa.
FDI propels Technology Transfer (Fu and Zanello, 2020), thus,foreign investors bring with them advanced technologies, managerial expertise, and best practices from their home countries. These technologies can help upgrade local manufacturing processes, enhance product quality, and improve overall efficiency. Local workers can benefit from skill development and training, which can have a long-lasting positive impact on the labor force. FDI provides the necessary technological Knowledge Transfer and Technology Spillovers (Auffray and Fu, 2015). Thus, foreign investors often bring advanced technological expertise, best practices, and innovative processes that can be shared with local companies. This knowledge transfer can lead to technology spillovers, where local firms learn from foreign investors, adopt new techniques, and improve their operations. FDI often encourages research and development activities in host countries (Wako et al., 2018; Auffre and Fu, 2015). Collaboration between local research institutions and foreign investors can lead to technological innovations that address specific challenges faced by West African economies. This can foster a culture of innovation and entrepreneurship, further propelling the non-oil manufacturing sector. The adoption of technology in service has seen some growth in countries such as Nigeria, Ghana, Cote d’Ivoire, and others.
This study focuses on evaluating the gaps that have lowered the ability of local firms to absorb and utilize technological advancement associated with FDI in non-oil manufacturing industries in West Africa. With the need for many West African countries to diversify their investment into manufacturing, services, agribusiness, and infrastructure, there is a need to evaluate the technological advancements that have been unleashed in these sectors.
Problem Statement
In West Africa, studies have posited the fact that local firms and businesses have been established to have low absorptive capabilities (Osabutey and Jackson, 2019; Akhtaruzzaman et al., 2018; Shukra et al., 2018). Studies have identified that depending on the various technological advancements from FDI, specific sectors can adopt an effective adaptive capacity to inculcate technological resources for local businesses and firms (Antwi et al., 2013). One of the non-oil manufacturing sectors such as agriculture has witnessed little technological advancement in their operations (Auffray and Fu 2015; Fu and Zanello, 2020). This means that the production capacity is still low, and they cannot compete on the global stage even though there are FDI inflows. Likewise, the issue of limitation on absorptive capacities. Thus, FDI, which is formed based on partnership, should be able to help in technological transfers to local businesses and enterprises. However, there is a gap in which these local enterprises have not been able to utilize this to their advantage. Compared to companies and businesses in China that have leveraged foreign technology to compete effectively, local companies in West Africa have not fully utilized these technological advantage opportunities. Developing countries in West Africa hardly utilize the technologically advanced capabilities that FDI brings. The study from Auffray and Fu (2015) noted that there is a lack of human resource capacity to absorb the technological innovation brought in by the FDI. In addition, absorptive capacity limitations. Local industries may lack the necessary absorptive capacity to effectively absorb and implement foreign technologies. This could result from a shortage of skilled human resources, limited access to training and education, or underdeveloped technical expertise needed for technology integration.
While there have been studies on FDI in traditional, oil, and non-oil industries like manufacturing in West African countries (Managi and Bwalya, 2010), there are still gaps that need to be filled. Thus, West Africa's non-oil manufacturing sector currently faces significant challenges that hinder the effective utilization of FDI for technology transfer, knowledge dissemination, and sustainable economic development. These challenges encompass regulatory barriers, inadequate infrastructure, limited access to skilled labor, and a lack of coordinated policies from the public and government institutions. As a result, the region's potential to diversify its economy, reduce dependency on oil exports, and create job opportunities remains largely untapped. Addressing these challenges and identifying strategies to create an enabling environment for FDI-driven technological advancements is crucial for unlocking the transformative potential of West Africa's non-oil manufacturing sector and promoting a more resilient, inclusive, and sustainable economic landscape.
Aim of the study
This study aims to evaluate and ascertain the technological advancement that has been accompanied by FDI in West African countries. Additionally, the objectives of the study focus on evaluating the impact of this technological advancement on the development of businesses and the growth of their operations.
Research Question
The question that elucidates the necessary response is what are the factors that support the level of technological adaption accompanied by FDI in sub-Saharan African countries? Additionally, what are the government policies and efforts being made to sustain these factors to support technological adoption through FDI?
Objectives of the study
This study has focused on these objectives:
a. To examine the types of technological advancements introduced through FDI in the non-oil manufacturing sector and their contributions to local industries.
b. To evaluate the factors influencing the adoption and diffusion of foreign technologies within West Africa's non-oil manufacturing sector.
c. To analyze the role of government policies, regulations, and institutional support in facilitating or hindering FDI-driven technological advancements.
Delimitation of the study
The delimitations of the study focus primarily on the technological advancements through foreign direct investments (FDI) in West Africa's non-oil manufacturing sector. Thus, evaluating the respective FDIs and how it has impacted technological advancements among the local businesses.
Significance of the study
This study is particularly important for local businesses and manufacturing companies in West Africa to harness the technological advancement that is infused by FDIs. This can improve their adaptive capabilities and ensure they have gained the necessary technological transfer and knowledge spillovers. This eventually improves their efficiency to compete globally and improves the margins of profitability and scale. Additionally, this study improves knowledge of the necessary strategies and practices that local businesses can adopt to gain more from the FDI’s facilitated Innovation and Research & Development (R&D). Thus, the ability to build Strategic partnerships between foreign investors and local institutions can stimulate innovation and R&D activities, leading to the creation of new products, processes, and solutions that cater for local and international markets.
Theoretical Framework
The theoretical framework of the study focuses on the concept of technological advancements through FDIs. The Innovation Diffusion Theory, formulated by Everett Rogers in the mid-20th century has been adopted by the study to provide the necessary framework and variables. At its core, this theory offers valuable insights into the dynamics of how FDI contributes to the adoption and diffusion of technological advancements within West Africa's non-oil manufacturing sector.
The Innovation Diffusion Theory deals with the transfer of innovation from one specific context to the next, thus within the context of societal and business relationships there are direct and indirect procedures through which technological advancement can be transferred through FDI. Thus, the spread of a new idea is influenced by the innovation itself, communication channels, time, and a social system. Most importantly, the theory established that the willingness and ability to adopt an innovation depends on adopter awareness, interest, evaluation, trial, and adoption. People could fall into various categories for different innovations (Ajzen and Fishbein, 2005; Fishbein and Cappella, 2006)
Concerning unleashing technological advancements through FDI in West Africa's non-oil manufacturing sector, the theory can bring much insight into relative advantage, compatibility, and efficiency in production through the adoption of foreign technologies by local industries. The key role is for local industries to be part of the majority adopters of the technology and influence driving the process. This theory provides the necessary key variables and factors to influence technological advancement through FDI in the West African context. Thus, the need to evaluate the challenges, and opportunities associated with FDI-driven technological advancements.
The theory also harnesses the need for local companies to harness foreign investors’ technology such as operational technologies, management practices, and expertise, local industries, and businesses can be seen as potential adopters of these innovations.
By analyzing FDI-driven technology adoption through the lens of the Innovation Diffusion Theory, we can explore how different segments of the local industry, from innovators to laggards, respond to and embrace the introduced technologies. Factors such as the perceived relative advantage of the technologies, compatibility with existing practices, and ease of implementation will influence the speed and extent of adoption. Incorporating the Innovation Diffusion Theory as a theoretical framework enriches our understanding of how FDI can lead to the diffusion and integration of advanced technologies, contributing to the growth, innovation, and sustainability of West Africa's non-oil manufacturing sector.