Designing effective policy to achieve sustainable development impact of FDI: the case of Sub-Saharan Africa

To optimize the sustainable development impact of foreign direct investment (FDI), developing countries must attract FDI that aligns with sustainable development characteristics. This necessitates an understanding of host governments’ expectations and the design of policies tailored to these needs. This study aims to address the gap in international business policy research by assessing FDI policy designs and identifying conditions that influence their effectiveness in attaining sustainable development outcomes. Building on a policy design fit model, we develop propositions related to the coherence of policy goals (goal coherence), the consistency of policy means (mean consistency), and the congruence between goals and means. Using crisp-set qualitative comparative analysis, we evaluate FDI policies in selected Sub-Saharan African countries. Contrary to conventional expectations, our findings reveal that while the combination of goal coherence, mean consistency, and congruence between goals and means is typically considered pertinent for policy design effectiveness, goal coherence alone is sufficient to attain FDI policy design effectiveness in the sampled countries. These results suggest that policymakers should prioritize clear, coherent goals in FDI policies to enhance sustainable development impact, potentially reducing the need for overly complex policy designs. This has implications for the formulation of future FDI strategies in similar contexts.