Evaluation Of The Role Of Multinational Corporations Towards Economic Growth

Introduction

1.1 Background to the Study

Over the years, Multinational corporations (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 growth. The idea of multinational corporations has been around for centuries but in the second half of the twentieth century multinational corporations 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 corporations and host country institutions is not well understood (Wiig and Kolstad, 2010).

There is a risk that multinational corporations facilitate patronage problems in resource rich countries, exacerbating the resource curse. Multinational corporations (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 corporations 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 corporations of the same nationality. In a social formation where there are many multinational corporations from different nations, there are higher possibilities of conflicts than where they are mainly from the same country.

Activities of the multinational corporations in Nigeria have generated a repulsive reaction from many economic theorists like (Onimode 1982). Onimode(1982) went ahead to regard multinational corporations as monsters that have consistently and systematically stultified economic development in various parts of the world. The merits of the multinational corporations in Nigeria, the consequences of economic exploitation of multinational corporations in Nigeria and suggested ways for restitution will be discussed in this study while examining their role towards economic development in Nigeria.

1.2 Statement of the Problem

Most of the multinational corporations 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 corporations 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 role of multinational corporations towards economic growth of Nigeria.

1.3 Objectives of the Study

1. The following are the objectives of this study:
2. To examine the role of multinational corporations towards economic growth of Nigeria.
3. To identify the factors determining the growth and success of multinational corporation in Nigeria.
4. To examine the demerits of multinational corporation to their host country.

1.4 Research Questions

1. What is the role of multinational corporations towards economic growth of Nigeria?
2. What are the factors determining the growth and success of multinational corporation in Nigeria?
3. What are the demerits of multinational corporation to their host country?

1.5 Hypothesis

HO: Multinational Corporations has not contributed to economic growth in Nigeria.

HA: Multinational Corporations has contributed to economic growth in Nigeria.

1.6 Significance of the Study

The following are the significance of this study:

The outcome of this study will be useful to government of Nigeria and the general public on the role of multinational corporation in the economic growth in Nigeria.

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 role of multinational corporations towards economic growth 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.