Exploring the Relationship between Foreign Direct Investment and Mobile Technology in Africa: An Application of Directed Acyclic Graphs

Abstract

The adoption of wireless mobile technology is increasingly gaining popularity globally and most especially in Africa. This advancement is propelled not only as a social networking device, but as a business operating tool. We investigate whether the penetration of wireless technology has a directed effect on foreign direct investment (FDI) in 47 African emerging markets for three time periods – 2001, 2004 and 2006. We estimate Directed Acyclic Graphs (DAGs), using the Partial Correlation (PC) and Greedy Equivalence Search (GES) algorithms to ascertain the direction of association between the penetration of wireless mobile technology and the level of FDI inflows. Our study indicates a significant successive growth in mobile technology in African economies and also suggests that mobile cell phone growth in Africa is an antecedent of FDI rather than a consequence since the DAG estimates a directional flow from mobile wireless technology to FDI across both the PC and GES algorithms.Keywords: