Response to foreign investment regulations in Nigeria : the bargaining power model
The interest for this research developed from the researcher's observation of host countries' policies (particularly developing countries) towards foreign direct investments. Available literature identify five main categories (though not mutually distinguishable) of host country policies: expropriatory, regulatory, receptive, promotional, and open-door policies. In this research, we are concerned with regulatory (control) policies. The response of MNCs to regulatory policies is identified to comprise of two stages: initial behaviour to 'conflict' (the policy), and the exploitation of (ownership) advantages. An MNC's initial behaviour could be competitive, collaborative, accommodative, compromising, or avoidant. Where the MNC adopts a compromising behaviour, bargaining as a means of resolving the 'conflict' is pursued. Whether this takes place or not in resolving the 'conflict', the MNC is likely to look back (assess) on what its ownership advantages are, vis-a-vis the host-country's location advantages, and then act on the basis of this assessment. Nigeria, like any other host country has economic policies, some of which affect MNCs. These include the Business Permit / Immigration Act, 1963; the Companies Decree, 1968; the Nigerian Enterprises Promotion Decrees, 1972 and 1977; the Local Sourcing Policy; etc. This research considers the factors influencing the response of MNCs to three of these policies: indigenization of ownership; nigerianization of management; and the local sourcing of raw materials. Four host-country characteristics and five MNC characteristics were hypothetically chosen as influential in the firms' response to each of the policies. The host country characteristics are: Nigeria's market attractiveness, availability of needed raw materials in Nigeria, availability of required human resources in Nigeria, and competition in the firm's industry in Nigeria. The MNC characteristics are: the firm's technological intensity, export intensity, complexity of managerial and operational tasks, size, and age. The major research findings are: (a) Most of the firms in the sample were collaborative in their behaviour in all the policies. (b) The most important (actually, the only) host country characteristic that significantly influenced the response of firms to the policies was Nigeria's market attractiveness. (c) The most important MNC characteristic that influenced the firms' response to the policies was their technology. (d) Contrary to popular opinion, this research found that important MNC characteristics encouraged or made firms to remain in Nigeria as well as comply with government policy, rather than making them arrogant or delay compliance. (e) All the firms in the study indicated that they had complied with the policies. Survey results were complemented with case studies. And the findings from the cases support all the above.