Foreign Direct Investment’s (FDI) effect on economic growth has been studied for a long time. Many empirical studies and theories have seen FDI as an important source of capital inflow and a determining factor for economic growth. However, Hayat (2019) highlights that the quality of institutions is important for the inflow of FDI and economic growth in the host country. According to North (1990), institutions are the fundamental reason behind economic growth since they allow new ideas, firms and stakeholders to exist in the market. Hence, the aim of this research is, therefore, to analyze if FDI and the quality of institutions affect economic growth in Sub-Saharan Africa.

By using panel data for 39 Sub-Saharan African countries during the time period of 2002-2019, the results reveal that FDI has a significantly positive impact on economic growth. The five institutional variables used in this study (Government Effectiveness, Voice and Accountability, Control of Corruption, Political Stability and Absence of Violence, Regulatory Quality) show no significance when it comes to the relation between quality of institutions and economic growth. Therefore, this study can not draw any conclusion regarding these results.