On the location choices of African multinational enterprises: do supranational economic institutions matter?

In this article, we examine the roles of supranational economic institutions in the location choices of African multinational enterprises (MNEs). In doing so, we first consider the main effect of supranational economic institutions. We then examine whether and how the strength of national economic institutions moderates the effects of supranational economic institutions. Using data from intra-African investments across five African Regional Economic Communities (RECs), we find empirical evidence suggesting that the economic institutions of RECs promote foreign investments of African MNEs. However, we also find that the effects of these supranational institutions are stronger in host countries with better national institutions, pointing to a disparity in the distribution of gains among member countries. By taking intra-African FDI and RECs as empirical contexts, the study not only contributes to filling a critical gap in our understanding of international business and institutions in Africa but also generates useful policy insights for the African Continental Free Trade Area (AfCFTA), which began operations on January 1, 2021.