Technology transfer and political alignment: new evidence from China’s outward foreign direct investment (OFDI) in Africa

This study addresses the underexplored area of outward foreign direct investment (OFDI) in Africa by emerging market firms, drawing on a unique dataset of 604 completed transactions by Chinese enterprises in Africa between 2010 and 2020. Our analysis reveals that Chinese OFDI in Africa is significantly influenced by the host country’s market size, natural resource endowments and political proximity to China. This study provides new empirical evidence that Chinese enterprises exhibit progressive technology transfer motivations in Africa, thereby contributing to a more nuanced understanding of OFDI beyond traditional economic frameworks. In addition, our use of the United Nations Voting Consistency Index provides a novel lens for assessing institutional distance and uncovering the strong association between political alignment and OFDI. This non-market strategy perspective complements traditional economic analyses of OFDI. Moreover, the heterogeneity analysis indicates that efficiency-seeking is not the primary motive for OFDI, particularly in the case of large centrally administered state-owned enterprises. The robustness of the findings was confirmed through a series of checks. Taken together, our research provides a valuable reference for future analyses of OFDI as well as a guide for other developing countries and multinational corporations looking to enter the African market.