Essays on industry linkages and foreign direct investment : evidence from Nigeria
This thesis is based on an econometric investigation of the relationship between industrylinkages and Foreign Direct Investment in Nigeria. Unique data obtained from a survey ofNigerian firms conducted by the World Bank Enterprise Survey Department was employedfor the estimations based on manufacturing and service firms. This study also constructed aninput-output table to measure both horizontal and vertical linkages. This study is divided intofour parts. Firstly, the study investigated spill-over effects from FDI to domestic firms throughhorizontal and vertical linkages using the augmented Cobb-Douglas models as well as theOrdinary Least Square and Fixed Effect techniques. The results of the estimation showevidence of the positive effects of foreign presence on domestic firms and the presence oflarge technology gaps. Also, the results indicate that there is a productivity spill-over in bothhorizontal and vertical linkages. Firms with technology level below its foreign competitorstend 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 tobe high and even larger than in similar countries around the region, but the extent ofinnovativeness 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 extentthat they do not have a significant impact on productivity (survival innovation). Thirdly, the study theoretically and empirically investigates the impact of Export-platformFDI on backward linkages; by doing this, a three-country model is developed and tested. Theresults from the various hypotheses tested indicate that there is a significant relationshipbetween FDI and backward linkages in Nigeria; and the role of the trade agreement, localcontent 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 firmsthrough the use of the Euler framework, and the consideration of the industry linkages. Theresults show that private domestic firms do have financing constraints and the flow of inwardFDI alleviates the financing constraints by signalling. This study provides new evidence onthe relationship between industry linkages and FDI in Nigeria.
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