The Impact Of Foreign Direct Investment On The Nigerian Economy Through The Telecommunication Sector Literature Reviews Examples
The obtainability of foreign-direct investment has become significant in the economy in order to boost the development in economic activities in a country where the favorable condition exists for competitive organizations and companies to start their projects in the host country by means of skill-transfer and job creation in the host country and generate profits for them as well. The visualization and implication of FDI provides the integration between the economic activities by means of progressive growth objectives and technological advancements (Buckley, et al., 2007). Bevan and Estrin (2000) infers that the economic process of FDI is considered to be carried out successfully when the determinants of OLI Model are satisfied and addressed accordingly in order to pave way for the firm’s entrepreneurs to consider the expansion of their operations. The organization that tends to operate its functions globally and expand its business should consider the (O) from the eclectic-paradigm in which the sustainable competitive edge of the organization is considered to be addressed during the expansion in order to provide the organization with the competitive assets by means of learning curve, technological skills and business expertise so that the organization’s decision of expansion will result in the long term profitability sustainability in the host country. According to Bevan and Estrin (2004)The eclectic-paradigm with respect to (L) provides the expanding firm with the availability and accessibility of favorable conditions in order to carry out production and business related activities by means of host country’s taxation policies, the availability of required material to continue the production processes and the cost effectiveness of wages so that the business formula of the organization can be considered as profitable and the organization endures the expansion with the availability of required resources in the host country. Moreover, (I) in the eclectic-paradigm indicates the organization’s ability to expand its operations in host countries without the intervention of merging with local entities by means of joint-ventures or partnership agreements in order to maintain and possess the positive bottom-line entirely to itself. According to Dunning (1998), the discussed dimensions are able to provide the organization with the likelihood to consider and carry out the global operations and result in the growth of FDI in the host countries. The discussed model provides the organization with the advantage of ownership that it will be incurred by means of monetary profits due to the possession of assets by the organization, increased independency in host country by means of internalization and increased location related advantage and hence, these factors as a whole provide the firms to expand globally and enhances FDI in developing countries.
Ajiboye (2001) infers that the telecommunication industry in Nigeria is considered to be enhanced with existence of 17.4-million consumers and counting and the foreign companies are entering the Nigerian market with the reduced imposition of regulatory barriers by the Nigerian government by means of reduced taxation and tariff rates. The study conducted by Wills and Daniels (2003) provides the evidence that the potential growth in telecommunication industry has resulted in the entrance of foreign organization and has resulted in increased FDI in which the merger between ECONET and Zimbabwean company took place due to the feasible unified licensing policies which provided the organization with the ability to reduce cost due to the experience from Zimbabwean market and the flow of local knowledge from the ECONET company and thus both companies utilized their tangible and intangible resources to the fullest potential and the effective licensing has provided the host companies with the better accessibility to local market and availability of local resources.
According to Hoff (2006), the large number of potential telecommunication customers has attracted the foreign companies in the South African and Nigerian markets and the companies’ notion with respect to the expansion in their operations is considered to be persistent with the increasing rate of globalization which promotes the economic activities related to the internalization of companies with the effective support from the government policies in order to promote the transfer of foreign assets and its emergence with the local assets to promote the economic activity of FDI. The study conducted by Taka (2001) enlightens the example of Detecon which possessed the fixed-line monopoly in the region and its licensing was acquired by the German and Dutch group which was already operating in thirteen countries and possessed the remarkable learning curve and its emergence in the South African-Nigerian region provided it with the increased capability to reach potential consumers due to the company’s experience in international operations. The Telkom company merged its managerial and technical aspects of business with Eskom and Transnet in order to reduce its cost of development of infrastructure and workforce and both companies focused on their customers by providing low cost services (Anderson, 2005).
Idachaba (2010) incorporates the implication of cost effectiveness in the operationalization of telecommunication industry in accordance with the notion of increased accessibility to the consumers by utilizing the most effective methods of cost reductions in such manner that the quality of the services is not compromised and the expansion of operations by the telecommunications takes place in order to achieve the positive bottom-line by accessing the potential market. The increased cost of available resources increases the overall cost of the services which adversely effects on the potential of firms to overcome the potential market and the infrastructure cost in the operationalization of telecommunication industry played a vital role in the increased cost of telecommunication services. The implementation of regulatory policies from the Nigerian-Communication-Commission provided with the guidelines which supported the 50 percent cost reduction in the overall operations which not only provided the reduction in taxes and tariff rates but also accumulated the cost of construction, energy resources and installation of infrastructure which ultimately promoted the emergence in the telecommunication industry of Nigeria. Moreover, Hoff (2006) infers that the competitive advantage gained by the Vodacom was a resulted from its joint venture with Yebo!net which enhanced the GSM and 2.5G features of telecom services and both the companies enjoyed exalted revenues by promoting FDI in the country.
Hassan (2012) infers that the local industry of telecommunication in Nigeria faced the higher levels of inefficiency in the year 2001 and the governmental response towards the improvising policies which resulted in the entrance of global telecommunication industries in the region and increased the efficiency of local industry with the transfer of flow and competition. The study incorporates that the deregulation in the industry was a part of reform that was adopted by the Nigerian government to foster the telecom industry so that the emergence of global players occurred in the local market and facilitated the industry with their technology. The accumulation of localized resources resulted in cost effectiveness of foreign companies which promoted FDI in the country and operationalized the licensing of 20 companies in the telecom sector and promoted the growth of 16000 percent over the period of nine years. The results of the study indicates that one individual out of two possessed the telecom services and the results proved that the deregulation of governmental policies resulted in the market penetration of foreign companies and increased the extent of FDI in the country which not only facilitated the customers by means of higher quality and services but also played their vital role in the economic development and fostered the local industry with the transfer knowledge and technology (Ndukwe, 2008). Moreover, regulatory and emerging analysis conducted by Ariyoosu (2012) indicates that the regulatory policies in the region resulted in the tax and tariff reductions which caused the reduced tariff rates charged by the telecom companies and attracted large number of population along with the ownership advantage of foreign countries. However, the acquisition of CAMTEL Mobile from the MTN group provided MTN with the accessibility in the local market and customer. The MTN company was first introduced in the country with its 30% partnership with Cable and Wireless and after developing its roots in the Nigerian Telecom Industry, the company effectively acquired the CAMTEL and increased its bottom-line (Schoentgen, 2012).
Ajiboye, J. O. Adu, E. O. & Wojuade, J. I. (2007). Stakeholders’ perceptions of the impact of GSM on Nigeria rural economy: Implication for an emerging communication industry. Journal of Information Technology Impact, 7(2), pp. 131-144.
Anderson, B. (2005). Telco's still in buying turf?: shares-telecommunication sector. Personal Finance Newsletter, (296), pp. 4.
Ariyoosu, D. A. (2012). An Examination Of The Legal Regulations And Taxation Of Telecommunications And Electronic Commerce In Nigeria (Doctoral Dissertation, Faculty Of Law, University Of Ilorin, Ilorin).
Bevan, A. A. & Estrin, S. (2000). The determinants of foreign direct investment in transition economies.
Bevan, A. A. & Estrin, S. (2004). The determinants of foreign direct investment into European transition economies. Journal of comparative economics, 32(4), pp. 775-787.
Buckley, P. J. Clegg, L. J. Cross, A. R. Liu, X. Voss, H. & Zheng, P. (2007). The determinants of Chinese outward foreign direct investment. Journal of international business studies, 38(4), pp. 499-518.
Dunning, J. H. (1998). Globalization and the new geography of foreign direct investment. Oxford Development Studies, 26(1), pp. 47-69.
Hassan, A. O. (2012). Telecommunications Reform and Effects of Competition on Availability, Quality and Cost of Services in Nigeria. Public Policy and Administration Research, 1(3), 8-19.
Hoff, D. (2006). South African cellular wars in Nigeria. International Journal of Emerging Markets, 1(1), pp. 84-95.
Idachaba, F. E. (2010). Telecommunication Cost Reduction in Nigeria through Infrastructure Sharing between Operators. The Pacific Journal of Science and Technology, 11(1).
Ndukwe, E. E. C. (2008). TELECOMMUNICATIONS AS CATALYST FOR A MODERN INDUSTRIALISED NIGERIA. Available from: http://hbmlygq.ncc.gov.ng/archive/speeches_presentations/EVC's%20Presentation/2009/TELECOMS_7PT_AGENDA.pdf [Accessed 24 March 2015 ]
Schoentgen, A. (2012). Network sharing: a hot topic for operators and regulators in Sub-Saharan Africa. Communications & Strategies, (86), pp. 43-63.
Taka, M. (2001). The internationalization of the South African telecommunications sector. In Trade and Industrial Policy Strategies Annual Forum. Muldersdrift.
Wills, A. & Daniels, G. (2003). Nigeria telecommunications market: a snap shot view. Africa Analysis, Retrieved on September, 3, 2011.
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