Essays on industry linkages and foreign direct investment : evidence from Nigeria

Ojaleye, E

Abstract

This thesis is based on an econometric investigation of the relationship between industry
linkages and Foreign Direct Investment in Nigeria. Unique data obtained from a survey of
Nigerian firms conducted by the World Bank Enterprise Survey Department was employed
for the estimations based on manufacturing and service firms. This study also constructed an
input-output table to measure both horizontal and vertical linkages. This study is divided into
four parts.
Firstly, the study investigated spill-over effects from FDI to domestic firms through
horizontal and vertical linkages using the augmented Cobb-Douglas models as well as the
Ordinary Least Square and Fixed Effect techniques. The results of the estimation show
evidence of the positive effects of foreign presence on domestic firms and the presence of
large technology gaps. Also, the results indicate that there is a productivity spill-over in both
horizontal and vertical linkages. Firms with technology level below its foreign competitors
tend to benefit from the technology brought by FDI.
Secondly, the study investigates Nigerian innovative outcomes of domestic firms’
performance by using the Crepon Duget Mairesse model coupled with augmented Cobb-
Douglas function. The result showed that firm-level innovation activity in Nigeria appears to
be high and even larger than in similar countries around the region, but the extent of
innovativeness is low and incremental. This suggests that in contrast with OECD countries,
some of the innovations implemented are so minor, or are based on imitation, to the extent
that they do not have a significant impact on productivity (survival innovation).
Thirdly, the study theoretically and empirically investigates the impact of Export-platform
FDI on backward linkages; by doing this, a three-country model is developed and tested. The
results from the various hypotheses tested indicate that there is a significant relationship
between FDI and backward linkages in Nigeria; and the role of the trade agreement, local
content requirement and market size is very critical for spill-overs and productivity.
Lastly, the study also looks at how FDI loosens the financial constraints of domestic firms
through the use of the Euler framework, and the consideration of the industry linkages. The
results show that private domestic firms do have financing constraints and the flow of inward
FDI alleviates the financing constraints by signalling. This study provides new evidence on
the relationship between industry linkages and FDI in Nigeria.

Citation

Ojaleye, E. (in press). Essays on industry linkages and foreign direct investment : evidence from Nigeria. (Thesis). University of Salford

• Thesis Type: Thesis
• Acceptance Date: Sep 28, 2018
• Deposit Date: Oct 2, 2018
• Publicly Available Date: Oct 2, 2018