- Title
- The influence of multinational corporations in promoting foreign direct investment in the South African business environment
- Creator
- Van der Berg, Jan Gabriel Mara
- Subject
- Investments, Foreign -- South Africa
- Subject
- Business enterprises Business Organisations Industrial promotion
- Date Issued
- 2019
- Date
- 2019
- Type
- Thesis
- Type
- Doctoral
- Type
- DPhil
- Identifier
- http://hdl.handle.net/10948/44213
- Identifier
- vital:37131
- Description
- One of the major driving forces behind international trade over the past thirty years has been Foreign Direct Investment (FDI). Due to the importance of FDI, a vast amount of research has been conducted on the various elements that make up FDI. There has also been widespread research done to measure the impact of FDI on host countries, and attempts have been made to determine the long-term benefits thereof. Despite the existent research on FDI, there is a dearth of literature on the unique situation in South Africa (due to the country’s fragmented past) and the impact of FDI on the South African economy. This study attempts to address this research gap and to add to the existent body of knowledge on FDI market entry. Thus, the primary objective of this study was to examine the impact of multinational corporations (MNCs) in promoting the entry of FDIs in South Africa, and the effectiveness of these investments in the South African business environment. The comprehensive literature review in this study included a discussion of the background to the pre- and post-apartheid South African economy, and the various efforts made by the South African government to facilitate sustainable economic growth through various economic policies. FDI was identified as one of the four major indicators of economic growth and was therefore investigated as a concept, strategy and driver of change. The South African marketing environment was analysed in order to assist in the identification of variables that are conducive to FDI. The final section of the literature review utilised three cases to better illustrate and understand the different challenges, market entry strategies and long-term implications of FDI. In this study, the independent variables (international marketing environment, stakeholder intervention, government considerations, resources and FDI incentives) were identified as influencing the mediating variable (FDI market entry strategy) and the dependent variables (competitiveness, sustainability, trade agreements and commitment of traders). These independent variables were selected to construct a hypothesised model and the research hypotheses. To this end, an empirical investigation was conducted, the measuring instrument used in this investigation was a questionnaire, which was assembled with the help of insights gained from secondary sources. The study respondents were selected through convenience sampling. A total of 210 respondents participated in the study, and 165 useable questionnaires were subjected to statistical analysis. The data collected for this study was subjected to five phases of analysis: exploratory factor analysis to assess validity; Cronbach’s alpha was used to test for internal consistency reliability; descriptive statistics to describe the fundamental features of the data by providing a statistical summary and analysis; and the nine hypotheses pertaining to the relationships between different variables were assessed using inferential statistical procedures, Pearson’s product correlation and regression analysis. This led to the adaptation of the hypothesised model and the hypotheses so as to indicate the changes resulting from the EFA. The findings of this study reveals that external stakeholder intervention as well as FDI incentives and resources effectively influence FDI market entry strategy in the South African business environment. The study results further reveal that the promotion of FDI market entry strategy positively influences competitiveness, sustainability, trade agreements and commitment of traders in the South African business environment. For MNCs to be successful in the expansion of FDI market entry strategy in the South African business environment, the study recommends that it is important to consider the availability of potential local partners, proximity to trading routes, reduction of the costs involved in supplying the market, the effect of tariff barriers and a competitive domestic economy. It is further recommended that MNCs need to focus on the utilisation of reliable and effective equipment in order to enable the productive management of operations in the South African business environment. The study also recommends the South African business environment as a strategic investment destination for the promotion of FDI market entry strategy as it offers low production costs in particular trading locations. This study has contributed to the field of FDI and the FDI market entry strategies employed by MNCs in South Africa. The research findings identified the international marketing (SLEPTS) factors through an assessment of the South African marketing environment, as these factors are deemed important for FDI to occur. The study also highlights the critical international marketing factors that could be used to improve local conditions through a mixture of incentives and policy re-alignment, so as to be more conducive to attracting large scale FDI. The hypothesised model developed for this study contributed to identifying the influence of external stakeholders on the successful market entry of FDI into South Africa, a critical element that MNCs usually only identify after market entry is complete. Evidence from the study shows that the South African government should direct FDI incentives towards those sectors in the economy that stand to benefit the most from the spill-over effects of FDI, in order to maximise the impact of FDI on the local economy. The research also indicates that elements such as restrictive legislation and government corruption may, to a certain degree, hinder FDI; therefore, these issues need to be addressed through legislation. It is recommended that all local efforts to attract FDI are industry or sector focussed, and that they are guided by government policies towards the greater benefit of the South African economy. Furthermore, the study found that the relationship between the host country and the MNC is critical to achieving sustainability in the long-term; therefore, it is suggested that the South African government improves its relationship with local businesses and MNCs that are looking to invest in South Africa. To conclude, it was found that South Africa has a very important role to play in attracting global FDI to Africa, as it has an accessible market based on geographic location, trade channels and traditional linkages with African and European networks.
- Format
- xxv, 347 leaves
- Format
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela University
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