Proposal on the Effect of Foreign Direct Investment on the Performance of Manufacturing Companies in South West Nigeria
Chapter One
Objective of the study
The following objectives will be assessed;
- To examine the effect of Foreign Direct Investment on manufacturing companies’ output in South West Nigeria
- To evaluate the effectiveness of Foreign Direct Investment in addressing fluctuation in manufacturing company’s output in South West Nigeria.
Chapter Two
Literature Review
In this section, a brief review of foreign direct investment, Nigeria manufacturing sector and theories on foreign direct investment.
Concept of Foreign Direct Investment
The International Monetary Fund’s Balance of Payment Manual defines foreign Direct Investment as investment made to acquire a lasting interest in a foreign enterprise with the purpose of having an effective voice in its management. FDI is an investment made to acquire a lasting management interest (normally 10% of voting stock) in a business enterprise operating in a country other than that of the investor (World Bank, 1996). Thirlwall (1994) conceptualised foreign direct investment as investment by multinational companies with headquarters in developed countries.
Nigeria Manufacturing Sector
Like every economy, especially developing ones, Nigeria has enjoyed a long period of sustained economic growth. It is currently ranked the 29th largest economy in the world. However, contributions from the industrial sector to the country’s Gross Domestic Product (GDP) are still poor. The history of industrial development and manufacturing in Nigeria has been marred with a series of policy inconsistencies and distractions attributable to the discovery of oil. Despite the challenges that beset the Nigerian manufacturing industry, it has witnessed good growth in recent years.
Theoretical Review
Despite numerous classifications of FDI theories, for the study, the standard classification and approach employed is the one followed by Agarwal (1980), discussed and analyzed in Moosa (2000) and Denisia (2010) that splits most FDI theories into two categories:
- Theories assuming perfect markets
- Theories assuming imperfect markets
The most important theories that assume perfect markets are:
- The differential rates of return theory
- The portfolio diversification theory
- The market size theory.
FDI theories that assume imperfect markets.
- The location theory
- The internalization theory
- The eclectic theory or OLI paradigm
- The international product life cycle theory
The differential rates of return theory
The theory of differential rates of return is among the oldest theories that attempts to clarify why some companies run after new markets or indulge in FDI. The main idea and hypothesis of this theory is that capital flows from countries with low rates of return towards countries with higher rates of return.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This section discusses the method and procedures employed in carrying out the research. It contains the procedures of collecting and analyzing data. Generally, specification of economic model is based on economic theory and on the available data relating to the study. Thus, the two-gap model was employed as a theoretical framework in this study to analyze the effect of FDI on the performance of manufacturing companies
METHOD OF DATA ANALYSIS
Regression analysis will be used in testing research hypotheses. The specification of the model in this study takes a lead in the models
References
- Agbarakwe, W. C. (2019). Foreign Direct Investment and Manufacturing Output in Nigeria: Empirical Evidence from VECM Model. International Journal of Business School Annals, 6(1):1-12 ISSN: 2361-7144.
- Denisia, V. (2010). Foreign direct investment theories: an overview of the main FDI theories. European Journal of Interdisciplinary Studies, 53-59.
- Moosa, I. (2002). Foreign direct investment. Theory, evidence and practice. Hampshire – UK: Palgrave Publisher, Ltd. (formerly Macmillan Press, Ltd).
- Saunders, M., Lewis, P. & Thornhill, A. (2012). Research Methods for Business Students. Pearson Education Ltd., Harlow.
- Thirlwall, A.P. (1994). Growth and Development.5th Edition, Macmillan, London.
