An Appraisal of the Effects of FDI on Technology Transfer in Nigerian Industries
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Background of the Study
Technological innovation is a key driver of productivity and economic competitiveness. FDI is widely recognized as an important conduit for technology transfer, enabling domestic industries to acquire advanced technologies and managerial know-how. In Nigeria, where technological progress is crucial for diversifying the economy beyond oil dependence, FDI can play a transformative role. Over the past decade, several multinational corporations have invested in Nigerian industries, bringing with them not only capital but also cutting-edge technologies and improved operational practices (Oluwaseun, 2023). The transfer of technology from foreign investors to local firms can spur innovation, enhance productivity, and foster a competitive business environment.
The process of technology transfer involves both direct mechanisms—such as joint ventures and licensing agreements—and indirect spillover effects through demonstration and competition. Empirical studies indicate that industries exposed to higher levels of FDI tend to adopt modern production techniques more rapidly, leading to overall improvements in efficiency and quality (Akinola, 2024). However, the degree to which FDI facilitates technology transfer depends on several factors, including the absorptive capacity of domestic firms, the regulatory environment, and the nature of the investment. In Nigeria, challenges such as limited R&D infrastructure, a shortage of skilled labor, and bureaucratic hurdles have sometimes hampered the effective transmission of technology (Ibrahim, 2025).
This study appraises the effects of FDI on technology transfer in Nigerian industries by analyzing patterns of innovation, R&D expenditures, and productivity metrics across various sectors. The research aims to determine whether FDI has led to significant technological advancements and to identify the key factors that either facilitate or impede this process. The findings will provide insights for policymakers and industry stakeholders, offering guidance on how to enhance the benefits of FDI for technology transfer and, ultimately, for sustainable industrial development.
Statement of the Problem
Although FDI is often associated with technology transfer, the expected improvements in technological capabilities within Nigerian industries have been uneven. Despite the inflow of foreign capital and expertise, many local firms continue to operate with outdated technologies and limited innovation capacity (Chinwe, 2023). The disconnect between FDI inflows and effective technology transfer may be attributed to several factors, including low absorptive capacity, inadequate R&D investment, and weak institutional support. In some cases, the benefits of technology transfer remain confined to the foreign investors, with limited spillover to the domestic industry.
This problem is exacerbated by structural deficiencies within the Nigerian economy, such as insufficient training programs, limited access to modern equipment, and restrictive intellectual property regulations. These factors hinder the local workforce from fully assimilating advanced technologies, thereby reducing the potential productivity gains from FDI. Additionally, the lack of effective collaboration between multinational corporations and local enterprises further limits the diffusion of technology. As a result, despite significant FDI inflows, the anticipated enhancement in technological capabilities and productivity has not been realized across all sectors. This study aims to investigate the obstacles to effective technology transfer through FDI and to propose strategies that can maximize the spillover benefits of foreign investments in Nigerian industries.
Objectives of the Study
• To evaluate the relationship between FDI inflows and technology transfer in Nigerian industries.
• To identify the barriers that hinder effective technology absorption by local firms.
• To recommend strategies for enhancing technology transfer through improved policy and institutional support.
Research Questions
• How does FDI influence technology transfer in Nigerian industries?
• What structural and institutional factors limit the absorption of foreign technology by local firms?
• Which policy measures can facilitate more effective technology transfer from FDI?
Research Hypotheses
• H1: FDI inflows are positively associated with increased technology transfer in Nigerian industries.
• H2: The impact of FDI on technology transfer is moderated by the absorptive capacity of local firms.
• H3: Policy interventions aimed at enhancing R&D and skills training significantly improve the technology transfer process.
Scope and Limitations of the Study
This study reviews industry-level data, R&D expenditure reports, and case studies on technology transfer over the past decade. Limitations include data constraints, measurement challenges of technology diffusion, and the influence of external technological trends.
Definitions of Terms
• Technology Transfer: The process by which advanced technologies are adopted by local industries from foreign investors.
• Absorptive Capacity: The ability of local firms to assimilate and effectively use new technologies.
• FDI Inflows: Investments by foreign entities that contribute to technological improvements in domestic industries.
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