The Impact of Globalization on Entrepreneurship Development in Developing Econom

[a] Lecturer, Department of Economics and Business Studies, Redeemer’s University, Redemption Camp, Mowe, Ogun State, Nigeria.

*Corresponding author.

Received 7 February 2012; accepted 25 April 2012.

Abstract

The paper examines the globalization phenomenon and its impact on entrepreneurship development in developing economies. It appreciates the various perspectives of globalization concept, however, it narrows the discussion to economic globalization and globalization of business in particular. A focus on the implications of globalization for entrepreneurship development in developing countries is imperative, in view of the role of entrepreneurship as the engine of economic growth,and also, considering the apparent controversy about the role of globalization in national economic growth and development which is polarized between a positive perspective and a negative perspective. The paper presents a critical analysis and appraisal of the impact of globalization on entrepreneurship in Nigeria. The analysis is founded on a blend of scattered observations and some qualified reasoning based on information from literature on indigenous entrepreneurship and economic/industrial activities, since the past one decade when the gospel of globalization began; and the relationship between globalization and entrepreneurship. The analysis reveals that globalization has both positive and negative implications for entrepreneurship development, however it is noted that for developing economies, the negative impact far outweigh the positive impact. It is therefore recommended that developing countries must make conscious effort to engage economic policies and measures to manage the influence of globalization on entrepreneurship development, in a way that reduces the negative impact and promotes the positive impact. In conclusion, the paper emphasizes that developing countries must operate a selective or guided open system with regards to business entry into their economies from outside, to guard against market adverse effect due to globalization.

Key words: Globalization; Entrepreneurship development; Impact guided open system; National economic growth and development

Akpor-Robaro, Masoje Oghenerobaro Mamuzo (2012). The Impact of Globalization on Entrepreneurship Development in Developing Economies: A Theoretical Analysis of the Nigerian Experience in the Manufacturing Industry. Management Science and Engineering, 6(2), -0. Available from URL: /index.php/mse/article/view/j.mse.1913035X20120602.2551

DOI: /10.3968/j.mse.1913035X20120602.2551

INTRODUCTION

The concept of globalization is no more novel to economists and business managers. What is new and attractive is the zeal with which it has been embraced lately and the depth of relevance which it has assumed in modern capitalism. Although it is a relatively new phenomenon in business world there is no doubt that since its introduction, it has increasingly gained currency as a strategic tool for nations’ development and for growing world economy. Specifically, it has played tremendous role in breaking the barriers which hitherto have constituted bottlenecks to international integration and free flow of goods and resources.

At inception, globalization was restricted to large corporations but this has changed in the last few years. It has now permeated all forms and sizes of businesses so that it is not just large corporations that have global focus but also, smaller firms are increasingly going global. As Pearce and Robinson (2003) put it, even relatively small service firms that possess a distinct competitive advantage now capitalize on large overseas operations. While it appears that the globalization phenomenon has offered enormous benefits to economic players and has facilitated the growth of many national economies, it is still controversial among analysts as to the exact ways in which nations and businesses have benefited from it.

However, while the controversy about the positive impact of globalization exists on one hand, there is also the theory of negative impact of globalization on the other hand, which to many overrides the positive impact. One area of focus where this debate attracts great interest for many countries and people is “entrepreneurship development”. To the positive impact school of thought, it is argued that globalization is a force for economic and entrepreneurial freedom, economic growth and prosperity. On the contrary, the negative impact theorists view globalization as a force for the suppression of the creative potentials (entrepreneurial creativity) of a people, socio-economic dictatorship and dependence, and economic exploitation of less privileged countries, particularly of the developing world. Whatever the view point, one thing is clear, every country is affected one way or the other by globalization. But each country’s experience differs according to its level of industrial development and national policies. For many countries however, it is a mixed grill of pleasures and pains or benefits and losses. As one writer puts it, “globalization is both a blessing and a curse to many societies”. This paper examines the Nigerian experience.

Since the past one and half decades there has been a great emphasis on entrepreneurship development in Nigeria. This is not unconnected with the perceived relevance of entrepreneurship development to the growth of the Nigerian economy and the economic and social benefits which it provides Nigerian people. However, the effort to pave the way for entrepreneurship development has not been without challenges. Economic analysts and industry observers have spotted many areas of difficulties. One of such difficulties which has been unanimously identified as the major problem bedeviling entrepreneurship development is lack of infrastructural facilities. This has been viewed and greatly orchestrated by industrialists and public commentators, as a very serious problem to the development of entrepreneurship in Nigeria. As Awe (2007) expressed, lack of infrastructure, particularly energy and transportation is the cog in the wheel of progress in the drive to making Nigeria an entrepreneurial society.

Although these difficulties exist and are noticeable and acknowledged by all as great mountains before entrepreneurs and government, it cannot be said that government is folding its arms and relaxing on its oars. It has made some laudable effort and had taken some giant steps directly and through its agencies to make economic policies that are friendly to entrepreneurship development. One major evidence of government concern is its economic policies of liberalization and deregulation in recent years. These are aimed at opening up the economy for participation in every sector of the economy both by indigenous and foreign investors. These policy directions have helped as a means to key into the global economic liberalization and world economic free trade policy which allows business firms and investors access without restrictions, to all markets of the world.

The adoption of trade liberalization policy since 1986 is to be able to benefit from the fast integrating world economy. It meant the opening up of the Nigerian economy for foreign investment and hence embracing the globalization phenomenon. It has been the hope of government and stakeholders that keying into the globalization process would positively benefit the Nigerian society in the area of entrepreneurship development, among others. However, the question which many have raised is that, in what ways and to what extent has the globalization phenomenon impacted on entrepreneurship development in Nigeria? This question forms the basis for this paper. The paper presents a theoretical analysis of the situation by examining the Nigerian experience as a window for assessing the impact of globalization on entrepreneurship and business operation in developing countries. The auxiliary objectives include: To promote an understanding of the challenges and trade offs which globalization poses to entrepreneurs in developing economies; provide a window for scholars and nations’ economic authorities to view and examine the many implications and controversies surrounding globalization with respect to industrialization and economic development in many countries, drawing inferences from Nigeria; and suggest approaches and methods to optimize the role and impact of globalization on entrepreneurship.

The challenge is majorly in marketing. Evidently, globalization has enabled cheaper goods to come into the Nigerian market, and considering the cost of production, locally, it is difficult for local entrepreneurs to favourably compete with producers of these foreign goods with cheaper cost of production in their home countries. Not only do the local producers have challenge with pricing but also with the quality of the goods brought into the market, a lot of which are of higher quality than the locally made. These factors have made the demand for locally produced goods very low.

Besides, globalization has made it possible for easy access to foreign goods by Nigerians and because of their features of comparatively lower prices and higher quality, there now exists some sort of homophobia syndrome among Nigerians with respect to locally produced goods. Consequently, many foreign producers and Nigerian importers of their products have now taken advantage of the situation to bring inferior and sub-standard goods to sell cheaply in the name of foreign goods, knowing that Nigerians have become obsessed with foreign labels.

Another aspect of the negative impact of globalization on entrepreneurship development which is of interest, is the fact that, it has caused a great deal of unwholesome entrepreneurial behavior, particularly in the manufacturing industry. This has come in the form of fraudulent and unethical practices such as stamping foreign labels on locally produced goods, imitating and faking foreign products. While some supposed manufacturers have resorted to importing products and repackaging them as though they were produced by them, others arrange with foreign producers to make products in their company labels right from the source. However, the very sad point is that some of these individuals who engage in these acts deliberately arrange with the foreign producers to produce substandard products to cut cost, so that they can sell at low prices.

Apparently, globalization has changed the natural and healthy competition in perfect market condition, the framework for sustainable entrepreneurship, to rivalry and market welfare in Nigeria, with all sort of unwholesome and unimaginable approaches, so as to keep pace with the global market challenge and remain relevant in the market.

CONCLUSION AND RECOMMENDATIONS

The preceding analysis of the impacts of globalization on entrepreneurship in Nigeria, has shown that, in-spite of the seeming positive impact (advantages) which a surface view of the situation tends to project, it is still glaring that Nigerian entrepreneurship is far worse off with globalization, as non- industrialized country. Obviously, Nigeria is in a disadvantaged competitive position industrially, as a developing country with a myriad of constraining factors on entrepreneurship and business operation. As in most developing countries, the poor conditions of its local business environment characterized with lack of infrastructure, make it difficult for entrepreneurs to operate at competitive cost function. To worsen the situation, Nigeria provides a large market and free business zone, with vast opportunities, without regulatory rigidities. These make the Nigerian environment an attractive and desirable market to foreign companies to do business, and because of the cost advantage these foreign producers have, they are able to compete out of market the local producers whose cost of production is very high relatively. In the circumstance, only very insignificant number of local entrepreneurs are able to withstand foreign competition brought about by free international market system which is being referred to as globalization.