Dimensions of International Joint Venture Activity in Ghana and Nigeria

This study investigates four key dimensions o f international joint venture (JV) activity
in Ghana and Nigeria: strategic motives, host country location factors, finance and
performance. These dimensions are explored in a multi-method empirical study.
Drawing on official annual aggregate and project level data, the trends and patterns of
FDI in Ghana and Nigeria are examined across several characteristics, trends over
time, ownership type of FDI, origin of foreign investor, geographical location of
projects and distribution by sector. The result shows that the more preferred mode of
entry for FDI is through the equity joint venture.
Primary data was collected by means of a self-administered questionnaire survey from
a cross section sample of 57 JVs in Ghana and Nigeria, with partners from Western
Europe, North America and Asia/Pacific. First, the relative importance of a set of
strategic motives and host country location factors influencing foreign investors’
decisions to form JVs in Ghana and Nigeria are identified. The main strategic motives
of the foreign partners are to overcome government-mandated barriers, risk and cost
sharing and to facilitate international expansion. The study finds government policy
towards foreign investors, political stability and market size as the main location
factors. Exploratory factor analysis is employed to identify the underlying dimensions
of strategic motives and host country location factors for the JVs. Hypotheses are then
tested (using t-test or Anova) by considering strategic motives and host country factors
in terms of the characteristics of the sample. Second, the manner in which JVs are
financed, the relative importance of barriers to JV investment finance and the
determinants of the financial structure of JVs in Ghana and Nigeria are examined.
Hypotheses are tested using contingency table analysis and t-test on the relative effects
of the barriers and the factors influencing the capital structure of JVs. Finally,
measures and determinants of performance are examined. A multiple regression
analysis is conducted to identify the main predictors of successful performance for JVs
in Ghana and Nigeria. The study identifies capital adequacy, partners’ capabilities and
congruity of motives and goals of the partners as important determinants of
performance. A paired sample t-test was also conducted to compare the performance of
JVs with host government partners and those with private sector partners, the results
indicate that JVs with private sector partners are perceived to perform better.