The Effect Of The Industrial Sector On Firms’ Performance In A Multi-cultural Economy

This paper presents empirical findings on the impact of the industrial sector on the performance of firms in a culturally diverse nation like Nigeria. The main objective of the study is to determine the overall effect of the industry in which a firm operates in a multicultural economy on its performance. The study opines that the cultural diversity of the Nigerian citizenry could determine to an extent the performance of a given firm in an industry and how the national economic policies affect its

operation. It examines the relationship that exist between the industrial sector of quoted firms in Nigeria and their return on assets (as an accounting performance measure) and Tobin’s Q (as a market performance measure). The study employed panel

data analysis using the Random Effect Model which is best suited for the data set, since there is need to control for the effect of the industrial sector on firms’ performance. The study shows that the industrial sector dummy variables are not significantly

related to the accounting measure of performance (ROA) but have a significant relationship with the market performance

(Tobin’s Q). The study concludes that regardless of the diverse cultural citizenship values in Nigeria, there is presence of the industrial sector in the economy. The study therefore recommends that Nigerian firms should strive to match their high market performance with real internal activities/operations that would reflect or rub-off on their internal growth and accounting performance.

Keywords: Multicultural economy, Firm performance, Industrial sector, Economic policies

 

Multiculturalism relates to communities containing multiple cultures. It is a term used to describe the belief that several different cultures can coexist peacefully and equitably in a single country. The term can be used in two broad ways, either descriptively or normatively (Heywood, 2000). As a descriptive term, it usually refers to the simple fact of cultural diversity: it is generally applied to the demographic make-up of a specific place, sometime at

the organizational level, e.g. schools, businesses, neighborhoods, cities, or nations. As  a  normative  term, it refers to ideologies or policies that promote this diversity or its institutionalization; in this sense, multiculturalism is a society “at ease with the rich tapestry of human life and the desire amongst people to express their own identity in the manner they see fit” (Bloor, 2010)

Opportunities abound for firms operating in a multicultural economy which they could take advantage of for better performance. The co-alignment principle states that "if the firm is able to identify the opportunities that exist in the forces driving change, invest in competitive methods that take advantage of these opportunities, and allocate resources to those that create the greatest value, the financial results desired by owners and investors have a much better chance of being achieved” (Olsen et al. 1998).

Industries in a multicultural nation operate in relatively more dynamic, uncertain, and complex environment and firms in general depend upon their environments for both survival and success.

 

In literature, some empirical evidences have shown that the environment firms operate in plays a significant role in inducing firms to adapt, with the attendant consequences for firm performance (see Miller 1987; Miller and Friesen 1983). Some researchers (Bourgeois 1984; Child 1972) also suggest that organizations proactively manipulate their environments or create new environments (e.g., by exploiting technology developments, bringing about market changes) to achieve their objectives.

Does the cultural diversity of the Nigerian citizenry determine to an extent the performance of a given firm in an industry and how the national economic policies affect its operation? What effect does the belief and values of the different cultural groups exert on the activities and operations of firms in a given geographical location? How can this performance be enhanced in a culturally diversified economy? This paper seeks to find answers to these questions. The paper is divided into five sections. Following this introductory section is the literature review. Section three discusses the methodology, model and sources of data. In section four, the data are analyzed and the results discussed while the conclusion is shown in section five