Foreign Direct Investment and the Performance of Manufacturing Firms: the Case of Developing Countries

Foreign Direct Investment (FDI) is seen as an important channel for obtaining access to resources for development and the emerging positive attitudes towards FDI are reflected in policy changes that increasingly facilitates FDI. Empirical studies on the impact of FDI in most developing countries like Nigeria largely dwelt at macro level particularly on economic growth, neglecting the micro level. Thus, this monograph looked at the impact of FDI on the performance of manufacturing firms in developing countries particularly, Nigeria. Time series data between 1989 and 2008 were employed and in the analysis Vector Error Correction was used for test of causality and the OLS for evaluating the relationship between FDI and Manufacturing firms. The findings revealed that causality between FDI and Manufacturing firms is bidirectional. Manufacturing Index causes growth in FDI, growth in FDI inflow causes Capacity Utilization and increase in Manufacturing Value Added. This analysis help in showing that developing countries has the needed resources and the market for manufacturing firms to thrive. Hence, the need for efficient FDI into these regions.