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)

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Type of the article: Research Article

Abstract
This paper investigates the impact of colonial ties, cultural proximity, and host-country market size on outward foreign direct investment from Arab Maghreb Union countries, focusing on both greenfield investments and cross-border mergers and acquisitions. Using the Generalized Method of Moments on a panel dataset of 556 transactions over the period 2004 to 2022, captured by the number of deals, we find that colonial ties and African cultural proximity positively influence both greenfield investments and cross-border mergers and acquisitions. However, Arab cultural proximity and host-country market size influence only greenfield investments. Among the variables studied, colonial ties have the greatest impact, followed by African cultural proximity. The estimated coefficients indicate that the magnitude of these effects is substantially larger for greenfield investments than for cross-border mergers and acquisitions, highlighting important differences in how firms respond to host-country characteristics across entry modes. This pattern is consistently observed across baseline estimations and robustness checks, reinforcing the presence of a clear entry-mode asymmetry in the determinants of outward foreign direct investment from Arab Maghreb Union countries. Taken together, the results integrate cultural proximity and historical ties into international business theories and provide new insights into the outward investment behaviors of emerging-market multinationals. Moreover, the findings reveal the relevance of leveraging shared history and cultural ties as instruments for attracting investment from Arab Maghreb Union countries, while adopting differentiated strategies for greenfield investments and cross-border mergers and acquisitions.

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    • Table 1. Description of variables
    • Table 2. Distribution of foreign direct investment outflows from the Arab Maghreb Union
    • Table 3. Main regression analysis
    • Table 4. Robustness check analysis
    • Conceptualization
      Mohammed Amine, Jalal Eddine Liassini, Aymane Chemmaa
    • Formal Analysis
      Mohammed Amine, Jalal Eddine Liassini, Mohammed Ibrahimi
    • Investigation
      Mohammed Amine, Mohamed Flah
    • Methodology
      Mohammed Amine, Aymane Chemmaa
    • Project administration
      Mohammed Amine, Jalal Eddine Liassini, Mohammed Ibrahimi
    • Software
      Mohammed Amine
    • Validation
      Mohammed Amine, Jalal Eddine Liassini
    • Writing – original draft
      Mohammed Amine, Jalal Eddine Liassini, Mohamed Flah
    • Data curation
      Aymane Chemmaa, Mohamed Flah
    • Visualization
      Aymane Chemmaa, Mohamed Flah
    • Writing – review & editing
      Aymane Chemmaa, Mohammed Ibrahimi
    • Supervision
      Mohammed Ibrahimi