FOREIGN DIRECT INVESTMENT (FDI) AS AN INTERVENTION TOOL FOR OPERATIONAL PERFORMANCE OF SMES IN LAGOS STATE

Abstract

Countries in the 21^st century globally depends on the operational success of small and medium enterprises (SMEs). However, the sector, particularly in the developing countries like Nigeria has not been able to copiously take advantage of FDI to enhance the operational performance of SMEs sector. On this backdrop, the study hinges on the resource-based theory to examine the influence of foreign direct investment as an intervention tool on operational performance of SMEs in Lagos State. A cross-sectional and random sampling techniques were employed to gather data from 382 SME owners/operators in Lagos State from the population of 8,395 out of which 377 were validly filled and returned via snowballing approach representing 98.7% response rate.  The primary data were further subjected to statistical analysis using frequency, Pearson Product Moment correlation coefficient, and regression. The study found out that foreign direct investment is an intervention tool which can deliver production capacity utilization, customer satisfaction, and process improvements as components of operational performance of SMEs. However, the study established that FDI has more effect on production capacity utilization than customer satisfaction, and process improvements. The study further recommends the need for CEOs or managers of SMEs to embrace FDI that encourages investing in training and development initiatives that equip employees to effectively operate foreign technologies and integrate new processes, thereby optimizing production capacity utilization and process improvements.