The impact of colonial legacy, cultural proximity, and host-country market size on outward foreign direct investment from the Arab Maghreb Union: A generalized method of moments analysis (2004–2022)

Key findings from this study

This research indicates that:

• Colonial ties exert the strongest influence on outward foreign direct investment from Arab Maghreb Union countries.
• African cultural proximity significantly affects both greenfield investments and cross-border mergers and acquisitions, while Arab cultural proximity affects only greenfield investments.
• Greenfield investments respond more strongly to colonial ties, cultural proximity, and market size than cross-border mergers and acquisitions.

Overview

This study examines how colonial ties, cultural proximity, and host-country market size shape outward foreign direct investment from Arab Maghreb Union nations. Analysis distinguishes between greenfield investments and cross-border mergers and acquisitions across 556 transactions from 2004 to 2022.

Methods and approach

The authors applied the Generalized Method of Moments to panel data spanning 19 years. This econometric approach addresses potential endogeneity and dynamic dependencies in the investment dataset.

Results

Colonial ties and African cultural proximity substantially increase both greenfield investments and cross-border mergers and acquisitions. Arab cultural proximity and host-country market size influence only greenfield investments, not acquisitions. Colonial ties produce the largest effect magnitude, followed by African cultural proximity. Effect sizes are substantially larger for greenfield investments compared to cross-border mergers and acquisitions across all estimated models. Robustness checks consistently confirm entry-mode asymmetry in how firms respond to host-country characteristics.

Implications

The findings integrate historical and cultural dimensions into international business theory relevant to emerging-market multinational behavior. Organizations in Arab Maghreb Union countries leverage shared colonial history and cultural ties as competitive advantages when entering foreign markets. Host countries seeking investment from these nations should adopt differentiated strategies that account for entry-mode differences and reflect cultural and historical linkages.

Scope and limitations

This summary is based on the study abstract and available metadata. It does not include a full analysis of the complete paper, supplementary materials, or underlying datasets unless explicitly stated. Findings should be interpreted in the context of the original publication.