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.