American Journal of Business and Management

Vol. 2, No. 3, 2013, 256-265

DOI: 10.11634/216796061302415

The Inevitability of Multinational Corporations towards Achieving

Sustainable Development in Developing Economies: A Case Study of the
Nigerian Economy
Hassan, Olanrewaju Makinde
Department of Business Administration, Faculty of Management Sciences, Kogi State University, Anyigba, Kogi State,
Nigeria, Email: [email protected], [email protected]

This paper dwells on the inevitability of multinational corporations in the sustainable development of
developing economies, using Nigeria as a case study. Over the years and with the advent of globalization,
multi-national corporations now move with ease across the world to economy of interest, most often times to
developing economies. Obviously speaking and considering the huge amount and the technicalities involve in
setting up these multi-nationals, it is obvious that the developing economies cannot do without them. The
study made use of secondary data sourced from the Central Bank of Nigeria statistical bulletin and the
National Bureau of Statistics between 1970 and 2011. The model for the study has as its dependent variable
the Gross Domestic Product (GDP) and its explanatory variables were Foreign Direct Investment (FDI) into
Nigeria. Using the Ordinary Least Square (OLS) multiple regression techniques; our study revealed that there
is a strong positive relationship between the Nigerian Gross Domestic Product (GDP) and foreign Direct
Investment (FDI). That is, the presence of FDIs has greatly impacted positively and significantly on the
Nigerian economy given the period of study. This is true to apriori and theoretical propositions. The study,
therefore recommended that efforts should be geared towards creating an enabling environment for FDI to
thrive in the economy.
Key Words: Multinational corporations, developing economies, sustainable development, gross domestic
product, foreign direct investment

Introduction
Despite the efforts of the developing countries and
international organizations or the economic
activities of Trans-National Corporations (TNCs),
developing countries have remained poor and the
progress in development is marginal. There are
legion of possible causes that might hinder
development or result in underdevelopment in the
Third World and many scientific studies tried to
determine these causes for deadlock in development.
The current public and scientific attention has
focused on transnational corporations, the major
players in the world economy, as possible source of
delayed development or even underdevelopment
(while other opinions claim the opposite).
However, this interest is not particularly new.
Since the early 1970s various research projects
focused their analysis on the relationship between
FDI - a measure for the activity by and presence of
TNCs - in developing countries and the economic
development of these poor host countries. The
findings of these analyses are quite contradicting.
Some assume beneficial effects resulting from FDI
on economic development while others claim that
FDI hinders economic development. Differences in
these research results can be attributed to the
diverging theoretical approaches, differences in

data (for instance due to different data quality or

differences in the composition of the sample, like
varying sets of countries), diverging model setups,
theory-based assumptions or the interpretation of
empirical results, just to name a few.
Two dominant strains of theories pursue
differing explanations for these sharply diverging
long-run growth patterns. One strain argues that the
answer lies in economic and political features of
developing countries and the way these have
changed over time in response to both world events
and internal pressures. That is; that the low
economic growth rate and development is homemade due to political instability, insecure property
rights, and misguided economic policies (Barro and
Sala-i-Martin 1995; Krugman and Obstfeld 2000).
The other theoretical strain's main argument is that
underdevelopment is a consequence of differential
distribution of power between the Northern
industrialized countries of the centre and the
Southern countries of the periphery. Transnational
corporations (TNCs) are seen as the major
economic agents who are interested in maintaining
the differences in development. The excerpt from
the interview with the former Malaysian prime
minister, Mahathir bin Mohamad, reflects this
position in a rather generalized manner by
emphasizing that TNCs are profit oriented
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American Journal of Business and Management

enterprises, which are too strong for domestic

enterprises to compete with and whose activities
solely serve their own interests. Since the number
of TNCs has been constantly increasing and the
economic size of some TNCs trumps the size of
whole economies, the trend towards an increasingly
globalized economy is undamped. Therefore, the
theoretical assumptions of development-theories
regarding the role of TNCs in the world economy
require continuous empirical analysis.
Statement of Problem
Multinational corporations operate at the crossing
point between production, international trade and
foreign investments. These companies are in the
middle of the debates about economic
globalization. They are known as transnational
corporations or as multinational firms too.
Multinational Corporation is a firm which control
and organize production using plants from at least
two countries (Caves, 1996:1). UNCTAD consider
that the number of multinational corporations is
about 63000. They have 700000 branches in other
countries. These multinational corporations and
their branches have 25% from world output and 86
millions of labour. Practically, 2/3 from world
exports of goods and services are made using
multinational corporations (Dunning, 2003: 77).
An important part of this international trade is
unfurled between firms, multinational corporations
and their branches from other countries. For
example, 33% of exports and 40% of imports are
unfurled between firms in U.S.A. (Grimwade,
2000:134). In the last twenty years, the importance
of the multinational corporations in world economy
grew up. Foreign direct investments of these
multinational corporations grew up from 180 billion
USD in 1980 to 1000 billion USD in 2000. In 2002,
for example, the stock of foreign direct investments
was about 7100 billion USD, given the situation of
802 billion USD in 1982 (UNCTAD, 2003).
The activity of multinational corporations
supports economic globalization. But their impact on
developing economies isnt a positive every time.
Multinational corporations deals with economic
efficiency and exploit the scale economies. As a
result, their branches migrate from those countries
which have strict regulations about corporations to
other countries with a permissive legislation. In
order to break this process, the developing countries
are forced to reduce the restrictions for multinational
corporations connected with taxes, labour and
environment protection. There is a contradiction
between the wish of the multinational corporations
to maximize their profits and national legislation
from those countries in which the multinational
corporations operate.
Nowadays, the elements which support the
placement of the multinational corporations in a

257

country are: market expansion, consumption zones

proximity, following competition and decrease of
costs. In world economy, we can assist to a race for
decreasing restrictions of the developing countries
against multinational corporations, in order to
obtain advantages for their citizens as a result of
branches place to their national territory. More, we
talk about a race to the bottom, which means
progressive migration of the capitals and
technologies from countries with high levels of
wages and regulations to other countries with
regulations which are more favourable for
multinational corporations. But for many
developing countries, multinational corporations
represent the lowest bad thing which they can
select. For these countries, the multinational
corporations create new jobs, develop infrastructure
and stimulate the demand growth.
On the other hand, there are a lot of favourable
factors for acceleration of the race to the bottom.
One of these factors is mobility. The multinational
corporations are able to migrate across national
boundaries. This process is easy in those countries
in which national boundaries control is minimal.
The process was initiated in industrial era and
developed after the Second World War
concomitantly with GATTs initiatives for world
trade promotion. As a result, trade tariffs and
capitals control decreased, for the beginning in
developed countries and after that in developing
countries. Another effect was the introduction of
new regulations about intellectual propriety rights.
Another factor which supported the acceleration of
the race to the bottom was the decrease of taxes and
wages in other countries in order to attract branches
of international corporations.
At last, we can mention the decrease of input
prices and the relaxation of restrictions against
multinational corporations. On the other hand, there
are new favourable conditions for multinational
corporations branches placement. The first
condition is goods homogeneousness. The
companies which produce the same good have the
same internal structure of the costs and are obliged
to compete one against other using marginal costs
and relative advantages.
On the one hand, dependency theorists and
environmentalists are generally pessimistic about
the contributions of MNCs to the protection of the
natural environment, particularly in host
developing countries. For these schools of thought,
the profit-maximising nature of multinational
enterprises as well as their extensive marketing
networks suggests that MNCs would try to move
their unwanted products from one country to
another until a market is found for such products
(ESCAP/UNCTC, 1988:12). Due to their urgent
need for employment opportunities, low-income
countries are often compelled to set lax
environmental standards in order to attract foreign

258

O. M. Hassan

investors. This problem, coupled with the high

costs of conforming to the more stringent
environmental standards in the advanced world,
means that developing countries are likely to
remain the havens of the pollution-intensive
industries of the multinational firms of the
developed world.
This argument does not only sound good in
theory. Instead, a number of empirical studies have
supported the relocation of dirty industries to
developing countries. For example, during the
1970s, there was a trend to locate new capacities of
the Japanese aluminium industry abroad due to
environmental considerations (Walter, 1975). In
sharp contrast to the above assessment, neo-liberal
economists contend that MNCs are perhaps the
most significant catalysts for sustainable
development, because multinational corporations
typically possess newer and cleaner technology and
have better management practices which can be
transferred to their subsidiaries in the developing
world. Thus, rather than pollution havens, MNCs
create pollution halos in developing countries
through the export of modern technologies. In
support of the pollution halo hypothesis, Eskeland
and Harrison (1997) found that foreign ownership
was associated with cleaner and lower levels of
energy use in Mexico, Venezuela and Cote
dIvoire. Similarly, Blackman and Wu (1998)
found significant support for the conclusion that
foreign investment in electricity generation in
China increased energy efficiency and reduced
hazardous emissions.
The above fundamentally divergent positions
clearly demonstrate the need for further investigation
about the real impact of MNCs on the environment
of the developing world. This is particularly so
because these seemingly logical, yet contradictory
positions put the policy-maker in a dilemma. How
should policy makers reconcile these positions to
make appropriate policies towards MNCs? Should
multinational enterprises be viewed as inherently
detrimental to the advancement of sustainable
development? How can the contributions of MNCs
to sustainable development be enhanced? Are they a
blessing or a burden.
Spicer (2002), executive vice president of
corporate affairs at Anglo American, suggests that
the most effective and efficient way of enhancing
MNC contribution to sustainable development is
through voluntary approaches rather regulation,
because you cant regulate virtue. This paper
however takes a contrary view by arguing that the
fact that the self- interest of a corporation and the
need to enhance shareholder value takes
precedence over concern for the community as a
whole (Shaughnessy, 2000: 163-64) means that
industry self-regulation is likely to be effective
only when it coincides with the profit motives of
multinationals. It is apparent that potential polluters

cannot make laws and sanction themselves when

they go against those laws. Thus, to the extent that
the raison d'etre of every business entity is to
maximise profit, MNCs need to be regulated if we
are to turn them into a more positive force for good
in the promotion of sustainable development. As to
what constitutes the appropriate forum of
regulating MNCs, it has been suggested that host
developing countries can, and must remain primarily
responsible for regulating foreign corporate activity
because they are the most affected by
environmentally-harmful corporate practices.
While the above line of argument is not
necessarily new, a major departure of this paper
from extant literature is its emphasis on the
inevitability of the multinational corporations on
developing economies in their quest for sustainable
economic development.
The paper is structured as follows: Sections 2 and 3
define and provide some stylized facts about
multinational
corporations
and
sustainable
development respectively. Section 4 appraises the
role of MNCs on sustainable development with
particular reference to host developing countries.
Section 5 focuses on the environmental records of
Royal Dutch Shell in Nigerias Niger Delta because
of the international notoriety it has received over
the past two decades. Section 6 outlines the
weaknesses of business-led voluntary codes in
promoting sustainable development, and therefore
emphasises the need for effective regulatory
mechanisms both domestically and internationally.
Section 7 concludes the paper.
Objectives of study
Our objective in this study is to find out the truism
of the inevitable roles Multinational Corporations
plays in the quest of developing economies like
Nigeria for desired and sustainable development.
Research Hypotheses
The hypotheses that shall guide this study are as
presented in Null and Alternative form below:
Null Hypothesis: Multi-National Corporations
cannot bring desired and sustainable development
to the developing economies.
Alternative
Hypothesis:
Multi-National
Corporations can bring desired and sustainable
development to the developing economies
Conceptual and theoretical Framework
Multinational corporations: Meaning and some
stylized facts
Although the modern MNC has its roots in the East
and West Indies traders of the mercantilist era

American Journal of Business and Management

(UNCTAD, 2002:2), the term multinational

corporation first appeared in 1960. Distinguishing
between portfolio and direct investment, Lilienthal
(1960:119) first used the term to refer to such
corporationswhich have their home in one
country but which operate and live under the laws
of other countries as well. Two major features are
associated with MNCs: first, their activities involve
more than one nation; second they are responsible
for most foreign direct investment (FDI). For
Dunning (1996), therefore, any corporation that
engages in FDI and owns or controls value-adding
activities in more than one country is a
multinational corporation.
The period 1970-2000 saw an enormous
growth of activity by multinational enterprises.
While only 7,000 MNCs existed in 1970
(Kolodner, 1994:2), there were as many as 63,000
parent firms with around 690,000 foreign affiliates
by the year 2000 (UNCTAD, 2000:37). MNCs
have been expanding not only numerically but also
financially. In 1998, the annual revenues of the top
5 corporations more than doubled the gross
domestic product (GDP) of the 100 poorest
countries in the world (UNCTAD, 2002:3).
The sheer size and enormous economic power
of MNCs s means they have the capacity to
influence development policy. Due to the perceived
benefits associated with them, political and
economic decisions by elected governments are
increasingly made to
provide favourable
environments for the investment and marketing
needs of MNCs. Consequently, corporations are
sometimes able to influence the domestic policy
outcomes of host developing countries by
threatening to move jobs overseas. This often raises
questions about whether corporate power enables
MNCs to effectively undermine sustainable
development
by
circumventing
domestic
environmental standards. Moreover, the fear that
firms will move jobs overseas and the calculation
of the effect that this could have on the economy,
can influence the degree to which developing
countries will impose environmental regulations on
multinational enterprises (Porter, 1999).
The extraordinary growth of MNCs also
enables them to influence policy outcomes at the
international level. At many international fora,
corporate lobbies have pushed for policies that will
benefit business enterprises and let them get away
with harming the environment. In the run-up to
Rio, for example, corporate groups were active in
defining the concept of sustainable development
and pressing for their interpretation of corporations
as promoters of sustainable development to be
represented in the official documentation coming
out of the conference (Chaterjee and Finger, 1994).
The interests of the various giant corporations in
the auto, mining, oil and chemical industries also
influenced the Kyoto Global Climate Change

259

Conference outcome (Shah, 2002). By influencing

the terminology in a way that enables them to
promote faith in industry self-regulation, MNCs
have thus far succeeded in escaping calls for direct
regulation of their activities. At Rio in particular,
corporations ensured that the only references to
them in Agenda 21 were in the context of
corporations as partners in sustainable development
or in the promotion of voluntary codes (Finger and
Kilcoyne, 1997). In this way, no explicit
obligations or regulations were placed on these
actors in the follow up to Rio.
An Overview of the Nigerian Economy
Nigeria is a middle income, mixed economy and
emerging market, with expanding financial,
service, communications, and entertainment
sectors. It is ranked 30th (40th in 2005, 52nd in
2000), in the world in terms of GDP (PPP) as of
2012, and 2nd largest within Africa (behind South
Africa), on track to becoming one of the 20 largest
economies in the world by 2020. Its re-emergent,
though currently underperforming, manufacturing
sector is the third-largest on the continent, and
produces a large proportion of goods and services
for the West African region.
Previously
hindered
by
years
of
mismanagement, economic reforms of the past
decade have put Nigeria back on track towards
achieving its full economic potential. Nigerian
GDP at purchasing power parity (PPP) has almost
trebled from $170 billion in 2000 to $451 billion in
2012, although estimates of the size of the informal
sector (which is not included in official figures) put
the actual numbers closer to $630 billion.
Correspondingly, the GDP per capita doubled from
$1400 per person in 2000 to an estimated $2,800
per person in 2012 (again, with the inclusion of the
informal sector, it is estimated that GDP per capita
hovers around $3,900 per person). (Population
increased from 120 million in 2000 to 160 million
in 2010). These figures might be revised upwards
by as much as 40% when the country completes the
rebasing of its economy later in 2013.
Although much has been made of its status as a
major exporter of oil, Nigeria produces only about
2.7% of the world's supply (Saudi Arabia: 12.9%,
Russia: 12.7%, USA:8.6%). To put oil revenues in
perspective: at an estimated export rate of 1.9
Mbbl/d (300,000 m3/d), with a projected sales price
of $65 per barrel in 2011, Nigeria's anticipated
revenue from petroleum is about $52.2 billion
(2012 GDP: $451 billion). This accounts about
11% of official GDP figures (and drops to 8%
when the informal economy is included in these
calculations). Therefore, though the petroleum
sector is important, it remains in fact a small part of
the country's overall vibrant and diversified
economy.

260

O. M. Hassan

The largely subsistence agricultural sector has not

kept up with rapid population growth, and Nigeria,
once a large net exporter of food, now imports a
large quantity of its food products, though there is a
resurgence in manufacturing and exporting of food
products. In 2006, Nigeria successfully convinced
the Paris Club to let it buy back the bulk of its debts
owed to the Paris Club for a cash payment of
roughly $12 billion (USD).
Review of Previous study
Sustainable development
Until the 1980s, opinions about MNCs as
development agents were largely influenced by the
orthodox view among free market economists that
MNCs are legally accountable only to their
shareholders for the financial performance of the
corporation. This view considered multinationals as
purely profit-minded entities that did not have any
legal obligation in incorporating societys interest
into their activities. Friedman (1970:126)
eloquently expressed this view thus: there is one
and only one social responsibility of business to
use its resources and engage in activities designed
to increase its profits
From the 1980s, however, a series of
environmental catastrophes associated with the
activities of MNCs coupled with the recognition
that humanitys survival is largely dependent on the
continued functioning of the natural environment
(Disseindorf, 2000), resulted in a considerable shift
in thinking regarding the role of MNCs in society.
Given that MNCs are the most important players
involved in environmentally damaging activities
(Third Wold Network [TWN], 1997), many
scholars now question the traditional model of
business as usual and call upon business
enterprises to place the long-term sustainability of
the environment alongside their narrow commercial
interests. This idea of balancing corporate interest
with environmental protection has given rise to
what has become known as sustainable
development.
From an international perspective, although
issues concerning environmental sustainability
were first raised by the 1972 Stockholm
Declaration, the term was first used by the WECD
[World Commission for Environment and
Development] (1987:43) to refer to any form of
development that meets the needs of the present
without compromising the ability of future
generations to meet their own needs. From the
business perspective, and for the purpose of this
paper, sustainable development means the adoption
of business strategies and activities that meet the
needs of the enterprise and its stakeholders today
while protecting, sustaining and enhancing the

human and natural resources that will be needed in

the future (Brkic and Douglas,1997:33).
The role of multinational corporations
sustainable development: An appraisal

in

Over the years, it has since remained an issue of

debate if truly multinational corporations play any
significant role in bringing development to their
host countries particularly the developing
economies. Some previous studies have posed such
questions as; does increase multinational
investment lead to environmental sustainability? Or
is there a trade-off between multinational
corporations and sustainable development? It is
widely accepted that technological progress is an
important factor in protecting the natural
environment. Technological advancement may
contribute to reducing environmental externalities
in two major ways: first, high level of technology
can help in the manufacture of products which are
less environmentally damaging to use or dispose of
(e.g. fuel-efficient vehicles); second, through
sophisticated technology, pollutants may be emitted
less intensively (UNCTAD, 1999:15). Warhust and
Bridge (1997) also suggest that technological
innovations such as energy-efficient flash
smelters, biotechnology-based leaching alternatives
to smelting are substantially reducing the overall
use of resources and the damage to water, land, air
and ecosystems
If it is accepted that increased technology can
contribute to improved environmental management
capacity, then it might as well be that MNCs are
the key to achieving sustainable development,
because they are the main transmission
mechanisms of technology to developing countries.
In 1995 alone, over 80% of global royalty
payments and licence fees were by MNC
subsidiaries to their parent companies (UNCTAD,
1997)13. Indeed, MNCs are not only the major
technology innovators, but they also possess skills
in the safe handling, transport, storage, use and
disposal of toxic materials, and in the development
of pollution abatement technologies (Morimoto,
2005).
Moreover, multinational enterprises can
positively contribute to sustainable development
through the transfer of environmental managerial
skills that are not available to host developing
countries. As DiConti (1992:107) writes: Through
its empowerment of indigenous professionals and
managers, multinational corporate subsidiary
transfers knowledge and experiences that are less
available locally. In support of this argument,
Eriksen and Jansen (1998) draw our attention to the
international environmental activities in China,
from Novo Nordisk, (a Danish pharmaceutical
MNC) which developed a joint venture with the
Suzhou Hongda Group in the production of starch-

American Journal of Business and Management

degrading enzymes for the alcohol industry. As a

result, untreated water is no longer discharged, but
processed through biological wastewater treatment
plants which reduced the organic material by 90 per
cent14.
In sum, the technological advancements of
MNCs, coupled with their high management skills,
it is argued, places them at a greater advantage in
enhancing the sustainability of the ecology. Thus,
Schmidheiny (1992:9) concludes that "[g]iven the
large technological and productive capacity of
business, any progress toward sustainable
development requires its active leadership". For
developing countries in particular that do not have
adequate resources for technological innovation,
one can legitimately claim that the multinational
corporation may not only be regarded as an
important agent of sustainable development, but is
also the only real hope (Drucker, 1974:134).15
While there is little doubt that MNCs possess
clean technologies than can enhance environmental
sustainability, many scholars remain doubtful
whether MNC technology is an unmitigated
blessing to host developing countries. Because of
their greater technological capacity, the use of
production techniques or substances that are more
ecologically damaging, and the larger volume of
production that they characterise, MNCs usually
have a negative effect on the environment when
they newly produce in, or export to an area. With
the increasing spread and market penetration and
share of MNCs, the damaging environmental
effects have increased. For example, these
companies account for a large part of increased
forest logging and deforestation in Indochina, the
Pacific and South America (TWN, 1997).
Moreover, it has been suggested that MNCs, in
order reduce cost, apply inferior environmental
technology, management practices and standards in
their developing countries subsidiaries. A large
proportion of equipment transferred to developing
countries, it is argued, is either too sophisticated for
developing countries to be accustomed to, or too
obsolete to reduce cost and increase efficiency.
Moreover, MNCs supply technology and any other
know-how to developing countries with very high
prices16. From this perspective, multinational
enterprises are said to perpetuate technological
dependence other than aiding sustainable
development.
However, the most significant aspect of the
inappropriateness of MNC technology relates to
their environmental and safety dimensions. Do
MNCs export environmentally harmful technologies
to their affiliates in poor countries? There are claims
that due to the high environmental standards in
developed countries, MNCs systematically shift their
environmentally noxious operations to developing
countries. For critics, industrial disasters such as the
1984 Bhopal catastrophe and the recent

261

environmental practices of Shell in Nigerias

Ogoniland epitomize the environmental hazards
underlying the operations of MNCs.
Worse still, current international agenda
suggest that there is no real will to change harmful
production methods. Already, the costs and
uncertainties of creating and applying new
technologies from scratch are generally quite high
and have to be borne by some entity, [either]
business or government (Venon, 1976: 43-44)17.
However, given their insufficient financial
resources, most developing countries lack the
advanced and effective pollution control
technologies
required
for
environmental
sustainability. Instead, investments in technology
necessary for sustainable development can largely
be
obtained
from
foreign
corporations.
Unfortunately, however, the proposed Trade
Related Aspect of Intellectual Property Rights
agreement (TRIPS) at the WTO is likely to make
the transfer of clean technologies much more
expensive through excessive royalty fees. This will
further increase the inability of developing
countries to purchase clean technology, and ipso
facto, further compel them to loosen their
regulatory regimes in order to receive dirty
technologies from the multinationals of the
developed world. Indeed, evidence in many
developing countries including China already
suggests that indigenous enterprises accepted
pollution-intensive equipments from developed
countries because they were cheap (OECD, 1997).
Defenders of multinationals, however,
maintain that the above claims often over stretch
the environmental impacts of MNCs as though only
foreign multinational companies engage in
environmentally degrading activities. It is argued
that multinational corporations are neither better
nor worse than indigenous companies in their
environmental practices. In a comprehensive study,
UNCTAD (1988:228) finds that while the number
of industrial accidents appears to have risen over
the last fifteen years, available evidence indicates
that multinational corporations have been involved
in less than half of them. Many accidents have
occurred in purely national firms or in state-owned
enterprises (Ibid).
Moreover, while it may be true that MNCs
follow lower environmental standards in
developing countries than in industrialized nations,
there is respectable evidence that their
environmental practices in developing countries are
more responsible than local firms operating in such
countries (UNCTC, 1992: 233-234). This line of
thinking suggests that unless we recognize that
large corporations in general are environmentally
destructive, it would be somewhat unwarranted to
conceive of MNCs as purely antithetical to
sustainable development on the basis that their
activities destroy the environment.

262

O. M. Hassan

This argument can however be misleading from

one critical dimension. To be sure, that local firm
also sometimes engage in environmentally
deteriorating activities does not provide any
justification for MNCs to continuously shift their
obsolete technologies to developing countries
without adequate safety measures. This is
particularly so because multinational firms possess
greater technical, financial, and organizational
resources needed to solve environmental problems,
and must therefore bear an enhanced responsibility
to promote environmentally sustainable practices
than their local counterparts (UNCTC, ibid: 226;
Shrivastava, 1995)19. In this context, using the
activities of local firms in assessing MNC
environmental practices can be misleading.
From the above theoretical discussion, it
appears that if environment concerns were central
in MNC decision makings, then corporations could
be the best sustainers of the environment. However,
the empirical evidence reviewed in the next section
suggests that despite the capabilities of MNCs in
implementing higher environmental standards, their
contribution towards this course in host developing
countries is quite abysmal.

Research Technique
As such, we shall make use of the Ordinary Least
Square (OLS) multiple regression technique to
estimate the values of the parameters Bo, B1.
Besides, we will use the students t-values obtained
to determine the statistical significance of the
parameter estimates and the test of goodness of fit
for the model using the R2 technique. This will
enable us to know the percentage of variations
between the dependent variable and the explanatory
variables.
Then, the F-statistic test to determine the overall
significance of the multiple regression models and
the Durbin Watson test for the presence or
absence of autocorrelation.
Presentation of results
Our Ordinary Least Square (OLS) simple
regression results are as presented below:
GDP = -6.99E+08
+
6583.46 FDI
S.E
(1.63E+08)
(135.44)
t
-4.28
48.61
Prob.
(0.00)
(0.00)
R2 = 0.98, F-stat=2362.77 (0.00),DW= 0.23 N = 42

Research Methodology
Data sources
Based on the nature of the study, data collection
sources were secondary in nature. The study
sourced data from Statistics Bulletin of the Central
Bank of Nigeria (CBN), Federal Office of Statistics
(FOS) and Annual Abstract of Statistics of the
National Bureau of Statistics (NBS) for about 42
years covering the period between 1970 and 2011.
Model Specifications
In specifying our model, our dependent variable is
the annual time series data of the Gross Domestic
Product (GDP) as proxy for sustainable economic
development for the period between 1970 and
2011, while our explanatory variable is the annual
time series data of the Foreign Direct Investment
(FDI) as proxy for Multinational Corporations
(MNCs) covering the period between 1970 and
2011 as well. This is because the contribution of
Multinational Corporations should reflect in the
consistent growth in the Gross Domestic Product
(GDP) given the period under review. Therefore,
our model can be specified as thus;
GDP = b0 + b1X1 + U
Where,
GDP = Gross Domestic Product (GDP)
X1 = Foreign Direct Investment (FDI)
U = The stochastic error term

Discussion of results
The empirical results generated from the estimation
as presented above are revealing and in fact
instructive. The R2 which is the coefficient of
determination was found to be very high at 0.98,
implying a 98% explanation of variations between
our dependent and independent variables.
Likewise, the F-statistics was also found to be very
high indicating in the overall the high significance
of our research model.
With regards to the t-value, it was found that
the Foreign Direct Investment (FDI) recorded given
the period of study, has a statistically significant
impact on economic growth in Nigeria. The sign of
the estimated coefficient was positive with a very
high t-value of 48.61 suggesting that FDI has
greatly impacted on the Nigerian economy. This is
an indication that FD investments in Nigeria have
to a large extent justified its presence and have also
promoted sustainable economic growth in the
country.
It is worthy of note from the result obtained
and presented that the intercept was negatively
related to the GDP i.e. to economic growth. In
addition, it was found to be statistically significant
in its negative form, the implication of this, is that
when the FDI was at point zero, economic growth
in Nigeria was at its lowest ebb and a negative one.
Intuitively, the presence of FDI has greatly
improved the economic growth status of Nigeria
given the period of study.

American Journal of Business and Management

Conclusion
This paper dwells on the inevitability of
multinational corporations in the sustainable
development of developing economies, using
Nigeria as a case study. Over the years and with the
advent of globalization, multi-national corporations
now move with ease across the world to economy
of interest, most often times to developing
economies. Obviously speaking and considering
the huge amount and the technicalities involve in
setting up these multi-nationals, it is obvious that
the developing economies cannot do without them.
The study revealed that the presence of FDIs have
greatly impacted positively and significantly on the
Nigerian economy given the period of study. This
is true to apriori and theoretical propositions.
Recommendations
To maintain this feat, and to also keep the Nigerian
economy on the path of continous and sustainable
growth and development, the government must put
in place an enabling environment for FDI to thrives
and at the same time come up with policies that are
favourably disposed towards these multinationals.
However, caution must also be exercised so that it
will not be at the detriment of local industries and
the people of the country particularly their host
communities as the case with the Niger-Delta
region. This is very important, because we cannot
claim of ignorance of some of the environmental
hazards that some of these multinational
corporations to their host communities. Therefore,
as an addendum control measure policies should be
put in place by the government to compensate for
such hazards in several of the host communities of
these multinational corporations..
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American Journal of Business and Management

Appendixes
Table 1: Annual Time Series Data For Gdp And Foreign Direct Investment Into Nigeria 1970-2011.
S/N
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42

YEAR
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Gross Domestic Product (GDP)

5281.100
6650.900
7187.500
8630.500
18823.10
21475.20
26655.80
31520.30
34540.10
41974.70
49632.30
47619.70
49069.30
53107.40
59622.50
67908.60
69147.00
105222.8
139085.3
216797.5
267550.0
312139.7
532613.8
683869.8
899863.2
1933212.
2702719.
2801973.
2708431.
3194015.
4582127.
4725086.
6912381.
8487032.
11411067
14572239
18564595
20657318
24296329
24712670
3.40E+10
3.75E+10

Foreign Direct Invest. (FDI)

1003.200
1322.800
1571.100
1763.700
1812.100
2287.500
2339.000
2531.400
2863.200
3153.100
3620.100
3757.900
5382.800
5949.500
6418.300
6804.000
9313.600
9993.600
11339.20
10436.10
12243.50
20512.70
66787.00
70714.60
119391.6
122600.9
128331.9
152410.9
154190.4
157508.6
161441.6
166631.6
178478.6
249220.6
324656.7
481239.1
552498.6
387261.3
399841.9
441271.3
5234383.
5673950.

Source: Cbn Statistical Bulletin And National Bureau of Statistics

E-Views Software Analysis Results

Dependent Variable: GDP
Method: Least Squares
Date: 06/25/13 Time: 09:36
Sample: 1970 2011
Included observations: 42
Variable
Coefficient
C
-6.99E+08
FDI
6583.456
R-squared
0.983353
Adjusted R-squared
0.982936
S.E. of regression
1.01E+09
Sum squared resid
4.07E+19
Log likelihood
-929.2885
Durbin-Watson stat
0.232609

Std. Error
t-Statistic
1.63E+08
-4.283380
135.4388
48.60836
Mean dependent var
S.D. dependent var
Akaike info criterion
Schwarz criterion
F-statistic
Prob(F-statistic)

Prob.
0.0001
0.0000
1.71E+09
7.72E+09
44.34707
44.42982
2362.772
0.000000

265