IMPACT OF GLOBALIZATION ON CORPORATE ENTREPRENEURSHIP IN NIGERIAN OIL AND GAS INDUSTRY

ABSTRACT

Impact of Globalization on Corporate Entrepreneurship in Nigerian Oil and Gas Industry. The study set out to accomplish the following objectives which were to: determine if corporate entrepreneurship policy was changed as a result of globalization;  investigate  the   extent  to   which  multinational   corporations complied with the Nigerian content laws and regulations; find out the impact of globalization on national economy; evaluate the extent of engaging Nigerians in managerial positions and; determine the extent multinational corporations have been socially responsible to their host communities    The study used a survey design; and simple random sampling technique to select the four firms in the industry. A sample size of 270 respondents was used. Some of the respondents were interviewed.  The main instrument for primary data collection was the questionnaire, structured in five-point Likert scale. The secondary data were sourced  from  relevant  journals,  seminars  and  workshop  papers,  magazines, news-papers, unpublished materials (theses, dissertations, etc). Monographs, books and internet. The instrument was checked for reliability using the test re- test method. The reliability co-efficient was 0.99. The data were presented and analyzed using quantitative method such as frequency distribution tables. The test of hypotheses was done using Chi-Square and T-test. The findings indicate that: Parent enterprises were indifferent to impact of globalization on Corporate

Entrepreneurship policy; multinational corporations did not comply with the Nigerian   Content   Laws   and   regulations;   globalization   did   not   impact significantly on national economy; multinational corporations have employed Nigerians in managers and they have not significantly been socially responsible. Based on these findings these recommendations were made that: parent enterprises positively change corporate entrepreneurship policy; multinational corporations comply strictly with the Nigerian Content Act 2010; build their own  oil  refineries  in  Nigeria;  engage  technically  proficient  Nigerians;  and strictly observe the global injunction of being socially responsible. The ensuing harmony between Nigeria and MNCs should leverage her into global status in production and sale for profit.

CHAPTER ONE INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Economic globalization is an expanding phenomenon that is fast reshaping and integrating the world into a global village. Observably, the world is witnessing an irresistible thrust for close proximity, unprecedented interdependence and social and cultural linkages among the various economies of the world (House

2004:1). The world-system theory claims that globalization has been completed in the twentieth century. This was the time when the capitalist world system spread across the globe: it further claims that globalization does not constitute a new phenomenon. Its impact was partial because the communist regimes and the newly independent states challenged the West. In fact the world was divided between the West and the East. But economic globalization is the dominant phenomenon in the world today

Tores (2001:8), defines globalization as a concept by which the whole world for the purpose of trade and commerce is treated as a sovereign political entity. Here trade and commerce refer to numerous opportunities, unfettered access to the world market, and capital flow across the globe and sourcing for cheap quality resources. They belong to the realm of economies. In this sense, Riley (2005:9) defines economic globalization as the process of increasing economic integration between two countries, leading to the emergence of a global marketplace or a single world market. This economic globalization has been

occurring for the last several thousand years (since the emergence of trans- national trade). Recently, it has begun to occur at an increased rate over the last

20-30 years (Riley 2005:12). This recent boom has been largely accounted for by developed  economies integrating  with the less developed economies,  by means of foreign direct investment (FDI), the reduction of trade barriers and the modernization of these developing cultures. Also during the past few decades, according to Ikenson (2009:1), a truly global division of labour has emerged, presenting  opportunities  for  specialization,  collaboration,  and  exchange  on scales  once  unimaginable.  The  confluence  of  falling  trade  and  investment barriers, revolution in communication and transportation, the opening of China to the west, the collapse of communism, and the disintegration of the cold war political barriers has spawned a highly integrated global economy with vast potential  to  produce  greater  wealth  and  higher  living  standards  (Ikenson

2009:1).

In developed countries, globalization is pragmatic as it is concerned with actual circumstances. These circumstances include the facts that a small consortium of developed economies comes close to controlling the global economy, and in many industries today, chief competitors come from around the developed countries of  the  world.  For  example,  the  global  automobile  industry  today includes major competitors from Japan, Germany, South Korea, France, the United Kingdom, Sweden and United States. The situation is similar in other key industries including home electronics, information technology (IT) services, telecommunications,  medical  equipment,  software  development, pharmaceuticals and defense technologies (Steers and Nardon 2006:4). Also it is  striking  that  eighty-five  (85) of  the  top  one  hundred  (100)  transnational corporations have been on the UNCTAD list for several years. The disturbing revelation is that only two, Petroleos of Venezuela and Daewoo corporation of Korea are from the developing countries (UNCTAD, 2000).

The current global economic model is enforced through institutions such as the World Bank (WB), The World Trade Organization (WTO), The International Monetary Fund (IMF) as well as International Investment Agencies (IIA) and other such bureaucracies (International Forum on Globalization (IFG) 2009:1). These are the agents of globalization-WB, WTO, IMF, IIA. They individually and collectively facilitate the breakdown of barriers to free trade as well as resource  protection.  The  IMF  was  originally  envisioned  to  promote  steady growth and full employment by offering unconditional loans to economies in crises and  establishing mechanisms to  stabilize  exchange rate and  facilitate currency exchange. Much of this vision however, was never born out. Instead, pressured by United States representatives, the IMF took to offering loans based on strict conditions later to be known as structural adjustment or austerity measures, dictated largely by most powerful nations. Critics charge that these policies have decimated social safety nets and worsened lax labour and environmental standards in developing countries. The World Bank (The International Bank for Reconstruction and Development), was created to fund the rebuilding of infrastructure in nations ravaged by world war two. Its vision too, however, soon changed. In the mid 1950’s the bank turned its attention away from Europe to the third world, and began funding massive industrial development in Latin America, Asia, and Africa.

Many scholars and critics contend that the Bank’s aggressive dealings with developing nations which were often ruled by dictatorial regimes, exacerbated the developing world’s growing debt crisis and devastated local ecologies and indigenous communities. Both IMF and World Bank policies remain a source of heated debate (Henning 2002:73-74). Naomi et al (1999: 308) state that most critics including exponents of dependency theory in the host countries where transnational  firms  operate  maintain  that  foreign  capital  is  a  source  of

underdevelopment as these firms encroach on the sovereignty of African states, foment  distortions  in  their  economies  and  divert  resources  from  domestic growth.

The IMF and World Bank induce poor African countries to lower the standard of living of their people (George, 1990). Stiglitz, (2002: 68) goes on to say that after each nation’s economy is analyzed, the World Bank hands every minister the same four – step programme: Privatization, capital market liberalization, market-based pricing and Free Trade.

Onah (2003:3) states that the developing countries want to profit from globalization in the form of increased foreign trade, foreign direct investment, and international borrowing. For countries seeking financial assistance, the International Monetary Fund and World Bank provide it but apply a neo-liberal economic ideology or agenda as pre-conditions to receiving the loan (Madeley,

1999:103). Foreign direct investment is a purchase of sufficient stock in a firm to obtain significant management control (Ball et al, 2002:69). Furthermore, circumstances compel developing nations to concentrate on similar cash crops and commodities (Clogan, 2002: 66). This is a reality as African states have faced a disadvantageous position in the global economy. Most countries rely on a  narrow  range  of  primary  commodity  exports  for  their  foreign  exchange earning World prices for these commodities are often unstable, leading to considerable fluctuation in the incomes of exporting states (Naomi et al, 1999:

306). The scenario is like a huge price war; their resources then become cheaper favouring consumers in the West. While their goals are slightly different then, the International Monetary Fund and World Bank policies compliment each other (Colgan, 2002:74). Money, technology and raw materials move over more swiftly across national boarders. Along with products and finances, ideas and cultures  circulate  more  freely.  As  a  result  laws,  economics  and  social

movements are  forming at the  international level (Berrett-Koehler,  2004:1). Many politicians, academics and journalists treat these trends as both inevitable and (on the whole) welcome.

Knor, (2003:1) affirms that economic globalization is a very uneven process with increased trade and investment being focused in a few countries. This fosters a structure of dependence of the developing countries on the industrial nations. This dependence conforms to a type of international and internal structure  which  leads  them  to  underdevelopment  or  more  precisely  to  a dependent structure that deepens and aggravates the fundamental problems of their peoples (Santos, 1970: 231-236). In his considered view, this dependence cannot be overcome without a qualitative change in their internal structures and external relations. Under this exploitative dependence the analysis of the processes of constituting a world economy that integrates the so-called “national economies” in a world market of commodities, capital and even labour power, the relations produced by this market are unequal because the development of parts of the system occurs at the expense of other parts. For example, trade relations are based on monopolistic control of the market which leads to the transfer  of  surplus  generated  in  the  dependent  countries  to  the  dominant countries.  Also financial relations are from the view point of the dominant powers based on loans and the export of capital. These advantages permit them to receive interest and profits thus increasing their domestic surplus and strengthening their control over the economies of the other countries (Balogh,

1963). The developing countries are to embrace globalization as an inevitable choice or option (Knor, 2003:1). George (1990:143-187) describes the impact of this structured development as follows:

Debt is an efficient tool (in the hand of IMF and World Bank). It ensures access to other peoples’ raw materials and infrastructure at the cheapest possible terms. Dozens of countries must compete for shrinking export markets and can export only a limited range

of products because of Northern protectionism and their lack of cash to invest in diversification. Market saturation ensues, reducing exporters’ income to a bare minimum while the North enjoys    huge savings. The IMF cannot seem to understand that investing in a healthy; well- fed literate population is the most intelligent economic choice a country can make.

Transnational corporations especially in the Shell PDC, comprise parent enterprise (or entrepreneur or share holder or owner) that controls assets of another entity or entities in a country usually by owning a capital stake (UNCTAD 1999:5). Their foreign affiliates or multinational corporations are new ventures that are born within the confines of the existing parent enterprise or existing business venture in its home country. Management of these multinational corporations in their respective host countries become the sole responsibility of managers who function in the capacity of corporate entrepreneurs because their parent enterprise is based in the home country. This process of branching out or outgrowth is called corporate entrepreneurship or intrapreneuring (Ile, 2003:5). This is the process of bringing about new ventures or   corresponding  business  opportunity  through  internally  generated   new resource combination of the parent enterprise (Burgeman, 1984: 154; Stoner and Freeman, 1992: 157).

Steers  and  Nardon  (2006:3)  stress  that  succeeding  against  the  odds  often catapults a manager into the higher echelons of the organization with a concomitant increase in personal rewards. But failure to deliver often slows one’s career advancement, if it does not stop it altogether. Furthermore, these international corporations are important catalysts of growth. These firms bring essential capital, technology, management skills, employment, marketing capacity, goods and services to African economies (Naomi et al, 1999:307-308).

They concentrate mainly on the production of oil and gas, that is, prospecting, exploration, drilling, exportation, refining and distribution of crude oil and gas because they are capital intensive ventures requiring sophisticated skills and modern technologies, and standard human capital. These firms control assets much larger than the gross national product of most African countries (Naomi et al, 1999:308). The multinational oil companies exclusively held 100 percent equity in their operations in Nigeria from 1903 to 1973 through colonial inheritance. All Nigerian crude oil was marketed by the crude oil producing companies through their integrated system. Worse still, Nigeria, quickly as if it was labouring under an over bearing influence, sold back the bulk of its participating interest to the same foreign oil operating firms through a buy-back arrangement (NNPC, 2000:1). There is competition between supply chains but only after there is co-operation and collaboration within the same supply chains.

The uninterrupted gas flaring and oil spillage have caused devastating pollution in the environment where they do business of oil and gas. Fortunately globalization is promising vast potential to produce greater wealth and higher living standards for common humanity. But, unfortunately, cooperate entrepreneurs who are hired hands, may not exercise an unapproved right by the parent enterprises to take major decisions that can impact positively on their host  communities.  It  is  against  this  background  that  this  study  intends  to examine the impact of globalization on the cooperate entrepreneurs who are functionally in charge of multinational corporations in the host countries and the host communities of operation.

1.2 STATEMENT OF PROBLEM

Nigeria embraced  economic globalization as an inevitable choice or option. Being on the periphery, she focuses on low-skill, labour-intensive production and extraction of raw materials. Nigeria’s hope to strategically reposition her

economy as the twentieth developed economy in the world by 2020 appears unreal.  Her  sole  reliance  on  her  oil  and  gas  industry  to  achieve  her  set millennium goals is unrealistic. The economic business organization that substantially manages and controls her oil and gas industry is the multinational corporations. These multinational corporations are owned by the core states that concentrate on high-skill; capital-intensive production and they are militarily strong  and  appropriate  much  of  the  surplus  of  the  whole  world-economy without regard to the effect on others like Nigeria. The corporate entrepreneurs who are agents of the parent enterprises functionally control the operations of these  multinational  corporations.  They  are  functionally  responsible  to  their parent enterprises. They hardly employ Nigerians and where they do they pay them in local currency and pay their foreign counterparts or expatriate staff in foreign currency. Multinational corporations hardly provide safe and equitable working conditions, blatantly refuse to follow Nigerian pertinent laws and regulations or even protect her environment where they do business. They also fail both to act in socially responsible ways and abide by conventional ethical standards justifying their arbitrary actions on the claim of colonial inheritance. That is why they deliberately neglect the oil pollution which adversely affects the atmosphere, soil fertility, water ways and mangroves, wildlife, plant life, aquatic life and also acid rain.

Fishing and agriculture are no longer productive enough to feed the people in the oil and gas region of Nigeria. The long term neglect of the region by the multinational corporations or oil firms resulted in the absence of critical human development infrastructure and aggravated the tension in the region. Frustrated expectations, widespread indignation and unprecedented restiveness heightened the tension between the local communities and oil companies. This is worsened by the fact that corporate policy insists that parenting must fit with entrepreneurial    initiatives    at    strategic    business    unit    level    in    host

communities/countries where corporate entrepreneurs are functionally in charge of the Multinational Corporations. They doggedly pursue profit maximization and  callously  remit  proceeds  to  parent  enterprises  in  their  home  countries. Along this line, the resources of the multinational corporations are so tightly controlled by the parent enterprises that nothing is left or available for the new and unexpected. This constrains the corporate entrepreneurs from protecting the environment of host communities from pollution and other hazards incidental on  their  business  operations.  It  also  prevents  them  from  being  socially responsible with respect to the employment of natives of the host communities whose farmlands and aquatic life are destroyed by pollutants rendering fishing and farming, their two main occupations, unproductive. The host communities by way of reaction resort to violent antagonism and even kidnapping of these corporate entrepreneurs. The corporate entrepreneurs as dependent variable of globalization lack the capacity to abide by conventional ethical norms and professional standards even under the influence of globalization which attempts or promises to bring all human beings, “us” and “them” in the same global context where  “we”  are  “they”  and  “they” are “we”,  all enjoying common humanity.

It  is  therefore  pertinent  to  investigate  the  real  impact  of  globalization  on corporate entrepreneurs /intrapreneurs who make things happen in the Nigerian oil and gas industry.

1.3 OBJECTIVES OF THE STUDY

The main thrust of the study is the determination of the impact of globalization on corporate entrepreneurship in Nigerian oil and gas industry. To this end the following specific objectives are pursued:

1. To determine the extent to which the parent enterprises have changed corporate entrepreneurship policy as a result of globalization.

2. To investigate the extent to which the multinational corporations have complied with the pertinent Nigerian laws and regulations in her oil and gas industry.

3. To find out the impact of globalization on national economy in Nigerian oil and gas industry.

4.  To  evaluate  the  extent  of  employment  of  Nigerians  in  managerial positions in Nigerian oil and gas industry.

5. To identify the extent to which the multinational corporations in Nigerian oil   and   gas   industry   have   been   socially   responsible   to   their   host communities.

1.4 RESEARCH QUESTIONS

1. To  what  extent  have  parent  enterprises  changed  their  corporate entrepreneurship policy in response to influence of globalization?

2.  How     have  the  multinational  corporations  complied  with  pertinent

Nigerian laws and regulations in her oil and gas industry?

3.  To  what  extent  does  globalization  impact  on  national  economy  in

Nigerian oil and gas industry?

4.  To what extent has the Nigerian oil and gas industry employed Nigerians in managerial positions in multinational corporations in her oil and gas industry?

5.  How have multinational corporations in Nigerian oil and gas industry been socially responsible to their host communities?

1.5   RESEARCH HYPOTHESES

1. Most parent enterprises in the Nigerian oil and gas industry have significantly changed their corporate entrepreneurship policy in response to the influence of globalization

2.   Multinational corporations have significantly complied with the pertinent

Nigerian laws and regulations in her oil and gas industry.

3. Globalization has significantly impacted on national economy in Nigerian oil and gas industry.

4. Multinational corporations have significantly employed Nigerians in managerial positions in Nigerian oil and gas industry.

5. Multinational corporations in Nigeria have significantly been socially responsible to their host communities?

1.6  SIGNIFICANCE OF THE STUDY

The study is strategically important to the following sectors or organs:

i.  The  staff  of  Parent  Enterprises  of  multinational  corporations requires useful information on the realities of existence confronting the corporate entrepreneurs in  the  host communities where they  are  functionally  in charge of the operations of their multinational corporations. The strict pursuit of profit maximization and total neglect of the adverse consequences of oil pollution on the people and environment of the host communities expose them to antagonism and violence with the host communities. Also, the global competitive pressures do not appear to confer any authority on them to develop and take entrepreneurial initiates essential for conducive business environment in host communities.

ii.  Government Administrators of host communities will benefit from the analysis of findings with respect to compliance with targets set for oil companies in terms of local content utilization and quantum of composite value added or created in their national economies and  a review and analysis of their policies on social responsibility on the part of oil firms in host communities.

iii.    N.N.P.C staff will evaluate the effectiveness of its supervision of the multinational corporations in transforming the oil and gas industry into

economic engine for job creation, development of in-country capacity and active participation of all sectors of the national economy.

iv. Small  Business  Enterprise’s  Manager  will  face  new  business opportunities, apply international best practices and undertake strategies for capacity building, skill competency and supplier enhancement.

1.7 SCOPE OF THE STUDY

The scope of the study is on Economic globalization influence on corporate entrepreneurs in Shell Petroleum Development Company of Nigeria Limited, Chevron Oil Nigeria Plc., Texaco Oil Nigeria Plc., and Agip Oil Nigeria Plc. The core elements include: globalization, parent enterprises, multinational corporations in Nigerian oil and gas industry,  the  host country  government (Nigeria), the host communities (Niger Delta) and the Nigerian National Petroleum Corporation.

The geographical area comprised the Niger Delta region of Nigeria. The Niger Delta extends over an area of about 70,000 kilometers and accounts for 7.5 percent  of  Nigeria’s  landmass,  extending  from  Apoi  to  Bakassi,  and  from Mashin Creek to the Bight of Benin. The Niger Delta region traverses nine out of the 36 States making up the Federal Republic of Nigeria. These are Abia, Akwa Ibom, Bayelsa, Cross-River, Delta, Edo, Imo, Ondo and Rivers States. The estimated population of the region is about 30million comprising over forty different ethnic groups speaking 250 different dialects across about 3000 communities. The predominant occupations in the area are farming and fishing. Except for the oil sector, the industrial base is virtually none existent. (Osanebi,

2010: 10). The time covered by this study is from 2006 to 2010. This study is working on economic globalization and corporate entrepreneurship in multinational corporations in Nigerian oil and gas Industry.

1.8 LIMITATIONS OF THE STUDY

The limitations of the study are discussed in terms of financial constraint, time, and attitude of the respondents.

Financial  Constraint:  The  researcher  has  to  spend  quite  huge  amount  of money to travel to Port Harcourt, Warri and Lagos, gain access to relevant but classified journal on the internet, visit Libraries and outright purchase of some current literature etc.

Time: Time is always a constraining factor in carrying out research. Time is inelastic and has no substitute. All work and all human activities are done in time.  Hence the competing  pressure  and  constraint  in  the  face  of  dynamic changes in the topic researched. It was time consuming and highly involving.

Attitude of Respondents: There is the typical reluctant attitude on the part of some respondents to fill the questionnaire or grant interview. In some cases, some respondents expect to be paid for the use of their time and knowledge; if otherwise, they will be very reluctant in giving the required information. Some hoard information in keeping with the oath of secrecy. In spite of repeated assurance of confidentiality most of them fear the loss of their job. They stick to their gun. This attitude caused delays and hardship to the researcher because the study  must  be  carried  out based  on  information  received.  The  study  as  of necessity demanded and obtained materials utilized, secretarial services, local transportation to and from relevant centres which substantially impacted on the study. Oil and gas industry is in the Niger Delta domain. The zone is characterized by a high scale of violence including kidnapping of key operators

of the crude oil and gas industry. But amnesty granted to Niger Delta militants is relaxing the tension in the zone.

1.9 OPERATIONAL DEFINITION OF TERMS

Globalization: This is the world’s unrelenting drive to build-and capitalize on a more  integrated  and  more  productive  global  economy  that  leads  to  lower consumer prices and higher corporate profits (Steers and Nordon, 2006: 1). Economic Globalization: This is a process of increasing economic integration between two countries leading to the emergence of a global market place or a single world market.

Entrepreneur: This is a person (or group  of persons) who undertakes and operates a new enterprise or venture and assumes some accountability for inherent risk; in the context of the creation for profit, entrepreneur is often synonymous with founder.

Human   Resource   Management:   This   is   the   function   performed   in organization which facilitates the most effective use of people/employees to achieve organizational and individual goals or organizational effectiveness (Ivancevichi- Glueck, 1983:6).

Entrepreneurship: This refers to the parent enterprises who are owners of multinational corporations operating domestically in foreign countries/communities.

Corporate Entrepreneurs “Intrapreneur”/Senior Management: They comprise individuals whose education and experience are both broad and deep and who have the requisite skills for identifying and exploiting opportunities; fostering team-based innovation, or intercreativity, and managing change (Macbeth and Rimac, 2004:17)

Corporate  Intrapreneurial/Senior  Management: This is an application of management process to innovative spirit and activities for corporate benefits (Pinchot III, 1985: XII-XIII).

Corporate Entrepreneurship Function: This is an agency function in multinational corporations performed outside the home countries of the parent enterprises by hired corporate entrepreneurs in multinational corporations engaged in Nigeria oil and gas production with conflicting results in profit to parent enterprises and suffocating environment to the host communities where they do business.

Multinational Corporation: This is a foreign firm or holding company with a number of overseas operations each of which is left to adapt its products and marketing strategy to what local managers perceive to be unique aspects of their individual markets (Ball et al, 2006:6).

International Business: This business aims at making profit by carrying out its activities across national borders (Ball et al, 2002).

Glocalization: This captures the way in which homogenization and heterogenization intertwine (Robertson 1995a:40).

Globality: This is a contested phenomenon as we are… in a period of globe- wide cultural politics, involving explicitly globe-oriented ideologies. (Robertson 1992:5).

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