Finnish Small and Medium Size Enterprises in Nigeria – Factors Influencing lack of Foreign Direct Investments

Recently, Finnish firms through government delegations to Nigerian have become more interested in investing in the Nigerian market. There are already quiet a number of Finnish SMEs exporting in the Nigerian market. Within these SMEs already in the Nigerian market, none presently have FDIs as there entry mode choice. Thus, the main goal of this study is to discuss the factors why Finnish SMEs in the Nigerian market do not have FDIs as their entry mode choice. First, the thesis examines the determinants of FDI (utilising the PESTL framework) in the Nigerian market as well as in the Chinese market within 1980-2000 and 2001- 2010. This made it possible to correlate the determinants of FDIs within these periods and the time of entry of Finnish SMEs into Nigeria and the Chinese market. Thus, it provided a means to understand what was in place in the Chinese market why Finnish SMEs choose FDI and choose exporting for the Nigerian market. Second, the pattern of entry of Finnish SMEs was studied to understand the strategic process put in place internally in these firms for making decisions on entry mode choice. Third the study explored a host of external factors inhibiting entry mode choice such as perceived cultural distance, general environmental challenges and industry specific factors. Fourth, the study also examined a host of internal factors to the firms inhibiting entry mode choice such as degree of relevant international experience, orientation of business networks, firm size and nature of product offerings. This study was undertaken through extensive literature review on internationalisation and entry modes. The reasons for lack of FDIs in the Nigerian market among this Finnish SME were as follows: The FDI determinants in the Nigerian market at the time of entry of these firms were not adequate for their firms to opt for FDI and are still not adequate at the moment. The firm that choose FDIs in the Chinese market did that because the FDIs determinants were adequate to necessitate FDI entry mode choice. The result of the binary logistical regression analysis shows significantly that the reasons for lack of FDI in the Nigerian market are: (1) Firm Size, (2) Perceived cultural distance (3) Industry growth potential not adequate to attract FDIs (4) Business network not oriented towards the Nigerian market or West African in general (5) Insufficient relevant international experience needed for FDIs in the Nigerian market and Finally (6) high environmental uncertainty in the Nigerian market. /Kir1