Foreign direct investment, ICT diffusion, and economic complexity in Africa

The purpose of this study is twofold: First, to investigate the unconditional effects of ICT diffusion and foreign direct investment on economic complexity in Africa. Second, to examine the conditional effect of ICT diffusion on economic complexity in Africa. The estimation exercise is tailored such that FDI is moderated with ICT access and ICT usage to positively influence economic complexity. The analysis is based on fixed effects (FE) estimation and the system generalized method of moments (GMM) techniques, utilizing data from 36 African economies between 2010 and 2022. The study reveals several key findings. First, the results from the robust estimation (i.e. system GMM) show that both ICT diffusion and FDI have a significant and positive unconditional effect on economic complexity. The result further shows that FDI remains a potent channel to further enhance the effects of ICT diffusion on economic complexity in Africa. Secondly, the roles of governance quality, economic growth, and human resources remain vital for enhancing the region’s economic complexity. The policy implications of these findings are discussed.