CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Over
the years, Multinational companies (MNCs) have been a source of controversy
ever since the East India Company developed the British taste for tea and a
Chinese taste for opium (Stopford, 1998). A typical multinational corporation
(MNC) normally functions with a headquarters that is based in one country,
while other facilities are based in locations in other countries. In some
circles, a multinational corporation is referred to as a multinational
enterprise (MNE) or a transnational corporation (TNC) (Tatum, 2010). They enter
host countries in different ways and different strategies. Some enter by
exporting their products to test the market and to find whether their existing
products can gain sizeable market share. For such firms, they rely on export
agents. These foreign sales branches or assembly operations are established to
save transport costs because there is a limit to what foreign exports can
achieve for a firm owing mainly to tariff barriers and quotas and also owing to
logistics or cost of transportation. Most of the firms are encouraged by the
low wage rates and other environmental factors. To meet the growing demands in
the foreign countries, the firm considers other options such as licensing or
foreign direct investment which are critical steps. Some continue with export
even when they have settled for the foreign direct investment option. Every
step takes strategic planning and is motivated by profit through sales development.
The idea of multinational companies has been around for centuries but in the
second half of the twentieth century multinational companies have become very
important enterprises. Tatum (2010) proposes that multinationals operate in
different structural models. The first and common model is for the
multinational corporation positioning its executive headquarters in one nation,
while production facilities are located in one or more other countries. This
model often allows the company to take advantage of benefits of incorporating
in a given locality, while also being able to produce goods and services in
areas where the cost of production is lower (Ozoigbo and Chukuezi, 2011). The
second structural model is for a multinational corporation to base the
parent company in one nation and operate subsidiaries in other countries around
the world. With this model, just about all the functions of the parent are
based in the country of origin. The subsidiaries more or less function
independently, outside of a few basic ties to the parent. A third approach to
the setup of an multinational corporation involves the
establishment of a headquarters in one country that oversees a diverse
conglomeration that stretches to many different countries and industries (Tatum
2010; Robinson 1979). With this model, the multinational corporation includes
affiliates, subsidiaries and possibly even some facilities that report directly
to the headquarters. Such direct investment means the extension of the
managerial control across national boundaries (Gilpin, 1987). While
institutions are important for economic development, particularly in resource
rich countries, the interaction between multinational companies and host
country institutions is not well understood (Wiig and Kolstad, 2010). There is
a risk that multinational companies facilitate patronage problems in resource
rich countries, exacerbating the resource curse. Multinational companies (MNCs)
in service industries have given this sector’s large and growing impact on the
global economy (Goerzen and Makino, 2007). The Marxists view the emergence of
the multinational companies as a historically progressive aspect of capitalism
in the process of developing, at international level (Gilpin 1987; Stopford
1988). In all these views both Marxist and non-Marxist, the common basis is
productive activity in more than one social formation. Another point to be
noted right away is that in a social formation there may be many multinationals
with different nationalities and also many companies of the same nationality.
In a social formation where there are many multinational companies from different
nations, there are higher possibilities of conflicts than where they are mainly
from the same country. Activities of the multinational companies in Nigeria have generated
a repulsive reaction from many economic theorists like (Onimode 1982).
Onimode(1982) went ahead to regard multinational companies as monsters that
have consistently and systematically stultified economic development in various
parts of the world. The merits of the multinational companies in Nigeria, the
consequences of economic exploitation of multinational companies in Nigeria and
suggested ways for restitution will be discussed in this study while examining
their influence towards economic development in Nigeria.
1.2 STATEMENT OF THE PROBLEM
Most
of the multinational companies operate by seeking and securing the opportunity
for environment that has least cost of production of goods for world markets.
This goal may be achieved through acquiring the most efficient locations for
production facilities or obtaining taxation concession from host governments. This
has been looked upon by many has counterproductive to the host country. Though multinational companies have
contributed in terms of job creation but many of the employees of most
Multinational Corporation are poor remunerated. However, the researcher is
evaluating the influence of multinational companies towards economic
development of Nigeria.
1.3 OBJECTIVES OF THE STUDY
The
following are the objectives of this study:
1. To
examine the influence
of multinational companies towards economic development of Nigeria.
2. To identify the factors determining
the development and success of multinational corporation in Nigeria.
3. To examine the demerits of
multinational corporation to their host country.
1.4 RESEARCH QUESTIONS
1. What
is the influence of multinational companies
towards economic development of Nigeria?
2. What are the factors determining the development
and success of multinational corporation in Nigeria?
3. What are the demerits of Multinational
Companies to their host country?
1.5 HYPOTHESIS
HO:
Multinational Companies have not
contributed to economic development in Nigeria.
HA:
Multinational Companies have
contributed to economic development in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
The following are the
significance of this study:
1. The
outcome of this study will be useful to government of Nigeria and the general
public on the influence of multinational corporation in the economic development in Nigeria.
2. This
research will also serve as a resource base to other scholars and researchers
interested in carrying out further research in this field subsequently, if
applied will go to an extent to provide new explanation to the topic.
1.7 SCOPE/LIMITATIONS OF THE STUDY
This
study on the influence
of multinational companies towards economic development of Nigeria will cover
how the multinational corporation has affected the economy of Nigeria.
LIMITATION OF STUDY
1. Financial
constraint–
Insufficient fund tends to impede the efficiency of the researcher in sourcing
for the relevant materials, literature or information and in the process of
data collection (internet, questionnaire and interview).
2. Time
constraint– The
researcher will simultaneously engage in this study with other academic work.
This consequently will cut down on the time devoted for the research work.