Investment in Technology and Export Potential of Firms in Southwest Nigeria

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Adeoti, John Olatunji
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African Economic Research consortium
This study investigates investment in technology by firms in Southwest Nigeria, and how technology investment-related factors affect the export potential of firms. Data for the study was obtained from a survey of firms carried out between June and August 2008. The results demonstrate that investments in technology among the research sample firms are dominated by imported technologies, and investments in technology are not directly targeted at improving the export potential of firms. 84.4% of firms use either completely foreign technology equipment or equipment that are largely foreign technology. No firm uses completely locally fabricated production facility. Foreign direct investment in manufacturing is rare, and technology collaboration is largely in the form of technical support agreement and technology licensing. The application of ICT is most pronounced in customer relations management and office automation, while only 30% of the sample firms have invested in equipment/machines with computer aided manufacturing function. Only about 10% of the respondents consider improvement of export capacity a most important motive for technology investments. The results also demonstrate that firm size has a strong positive relationship with export potential, and it is the most important factor that affects the export potential of firms. The coefficient of firm size is the only parameter estimate that is consistently statistically significant at 1% level for all four export models estimated. Other technology investment-related factors that impact positively on export potential include skills intensity ratio, investment in skills upgrading, and investment in quality management.