Foreign Direct Investment from Emerging Markets to Africa: the HRM context

Abstract

In this article, we explore what determines the decisions of emerging-market multinational corporations (MNCs) to invest in Africa and whether this is any different from their counterparts in mature markets, focusing on the HRM context. More specifically, we explore the effect of potential host-country wages, local capabilities, and the relative rights of owners versus workers on foreign direct investment (FDI) decisions, as well as other relevant factors such as mineral resources and corruption. We found that emerging-market MNCs were not deterred by relatively weak property owner rights (as indeed, was also the case for their counterparts from mature markets); hence, any weakening of countervailing worker rights is unlikely to unlock significant new FDI. However, emerging-market MNCs were more likely to invest in low-wage economies and did not appear to be concerned by local skills gaps; the latter would reflect the relative de facto ease with which even partially skilled expatriate labor can be imported into many African countries. At the same time, a reliance on low-wage, unskilled labor, coupled with the extensive usage of expatriates, brings with it a wide range of challenges for the HR manager, which a firm committed to cost-cutting may lack the capabilities to resolve.