Foreign direct investment and technological advancement in the construction sector of developing countries: a critical perspective

Foreign Direct Investment (FDI) inflows are commonly used in developing countries (DCs) to ‘measure’ technology transfer, and consequently as an indicator for the technological advancement of economic sectors. An implied assertion being that increased FDI in a sector means an increase in foreign technology and knowledge (T&K) in that sector and in effect, technological advancement in the recipient country. An effect of this assumption is an increase in attempts by DCs to attract more FDI through incentive-laden policy reforms. While these efforts have contributed to increase in FDI, particularly in the construction sectors of DCs in Africa; there is, however, scant evidence suggesting that the rising inflows resulted in technological advancements. Thus, construction industries in many DCs continue to lag behind those of advanced countries. This paper takes as a point of departure the relationship between FDI and technological advancement. It argues that reliance on FDI to estimate ‘how much’ technology has been transferred and as an indicator of attendant advancement has limitations. From a critical perspective, such an assessment is inaccurate and neglects specific nuances of T&K transfer and technological advancement in the construction sector. Examining the Ghanaian construction sector as a case with coeval data, the paper unpacks the blind-spots inherent in the assessment of technological advancements that are heavily reliant on the use of FDI inflows. Insights from the paper contribute to the literature and policy regarding interrelations involving FDIs, the transfer of T&K and technological advancement in the construction sector in DCs.