Foreign direct investment, technological transfer, employment generation and economic growth: new evidence from Ghana

Abstract

PurposeThis study examines the effect of foreign direct investment (FDI) on employment and economic growth in Ghana and examines the role of technology in these relationships.Design/methodology/approachThis study applied the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and Granger causality tests to data from 1995 to 2017.FindingsBased on the empirical analysis, the key findings are as follows: FDI does not affect economic growth or employment in Ghana. However, technology moderates the relationship between FDI and economic growth and FDI and employment in the short run. The study also finds that technology exerts a positive effect on economic growth in both short and long run, whereas trade has a significantly negative effect on economic growth in Ghana.Research limitations/implicationsThe greatest constraint that faced the authors is the nonavailability of data,.Practical implicationsThe transfer of technology agreement enshrined in the GIPC Act should be made more robust and unambiguous, to make it a strict requirement for MNEs to be allowed to operate in Ghana. This increases Ghana's gains from FDI inflow.Social implicationsThe GIPC should tighten its monitoring regime so that MNEs do not exceed their expatriate employment quotas. This will ease the burden of unemployment among the youth in Ghana.Originality/valueThis study adds a new dimension to the literature on the impact of FDI on emerging economies by examining the role of technology in the association between FDI and growth, and FDI and employment.