Abstract:

This study examines the determinants of foreign direct investment (FDI) outflows from the Maghreb Arab Union, distinguishing between greenfield investments (GI) and cross-border M&As (CBM&As). Drawing on a panel of 556 investment deals from 2004 to 2022, and employing Generalized Method of Moments (GMM) estimation alongside panel count data regression models, we find that colonial ties and African cultural proximity are consistent and significant drivers of both GI and CBM&As. In contrast, Arab cultural proximity and host-country market size significantly influence only GI. Among these factors, colonial legacy exerts the strongest effect, followed by African cultural proximity, highlighting the enduring influence of informal institutions on Maghreb FDI decisions. By integrating identity and historical path dependence into institutional theory, we provide a novel framework for understanding emerging-market multinationals’ (EMNEs) outward strategies. For policymakers, our results highlight the need to leverage shared history and cultural networks to attract Maghreb capital, with tailored strategies for GI and CBM&As.