Resource endowment, environmental innovation, and foreign direct investment in Africa: The role of financial development

This paper investigates the moderating role of financial development on the relationship between natural resource endowment, environmental innovation, and FDI inflows across 54 African countries from 1990 to 2023. Using panel data, PCSE, and quantile regression methods, results indicate that resource endowment positively affects FDI, whereas environmental innovation negatively affects it. Crucially, financial development improves the resource effect, suggesting financial deepening may limit resource-curse dynamics. The negative environmental innovation effect becomes insignificant when moderated by financial development, suggesting that well-functioning financial markets can absorb the costs of green regulation. Quantile regressions show heterogeneity across FDI levels. Financial development is not a universal FDI-enhancer in resource-rich Africa; integrated resource governance, green innovation, and financial-sector reforms are required.