IDEAS home Printed from https://ideas.repec.org/p/ana/wpaper/19001.html
   My bibliography  Save this paper

Why Do Turkish Firms Go Abroad to Invest?

Author

Listed:
  • Yilmaz Kilicaslan

    (Anadolu University, Department of Economics)

  • Yesim Ucdogruk Gurel

    (Dokuz Eylul University, Department of Economics)

  • Gokhan Onder

    (Anadolu University, Department of Business Administration)

  • Zeynep Karal Onder

    (Anadolu University, Department of Public Finance)

Abstract

The aim of this paper is to examine the determinants and localization of outward FDI (oFDI) of Turkish firms that differs from developed country MNEs with respect to firm size, technology, skills and access to information about global markets. This research is the first attempt aimed to explore especially the determinants of country/region selection of Turkish outward FDI at the firm level by using discrete choice models. The findings in this paper are based on the primary data collected by in-depth-interviews with 299 outward-investing Turkish firms operating in manufacturing, wholesale and retail trade, transportation and storage, and information and communication sectors. Our descriptive findings show that 60% of the investments are green-field. We found that 68% of the investments were made in developing countries while the developed countries attracted only 32% of Turkish investments. Our findings show that the main motivation of Turkish firms investing in other counties is willingness to reach to the larger markets (77%). Our econometric findings show that the size of the firm and the parent firm are significant factors in selecting developed countries as the host country for the investment. As the size of the firm increases, the possibility of Turkish investors to choose developed countries is diminishing, while as the size of the parent firm bets bigger, the possibility of locating the investment in developed countries is rising. The high share of foreign ownership in parent firms has a positive impact on choosing developing countries to locate the investment. It seems that foreign firms benefit from the experiences of Turkish firms operating in developing markets. Finally, while willingness to avoid from tariffs has no significant impact on the probability of investing in developed countries (including EU countries), it increases the probability of investment in the member countries of Shanghai Cooperation Organization.

Suggested Citation

  • Yilmaz Kilicaslan & Yesim Ucdogruk Gurel & Gokhan Onder & Zeynep Karal Onder, 2019. "Why Do Turkish Firms Go Abroad to Invest?," EconWorld Working Papers 19001, WERI-World Economic Research Institute, revised Nov 2019.
  • Handle: RePEc:ana:wpaper:19001
    DOI: 10.22440/EconWorld.WP.2019.001
    as

    Download full text from publisher

    File URL: https://wp.econworld.org/uploads/2019/WP2019001.pdf
    File Function: First version, 2019
    Download Restriction: no

    File URL: https://libkey.io/10.22440/EconWorld.WP.2019.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Louis T. Wells, 1983. "Third World Multinationals: The Rise of Foreign Investments from Developing Countries," MIT Press Books, The MIT Press, edition 1, volume 1, number 026273169x, December.
    2. Susana Assunção & Rosa Forte & Aurora A. C. Teixeira, 2011. "Location Determinants Of Fdi: A Literature Review," FEP Working Papers 433, Universidade do Porto, Faculdade de Economia do Porto.
    3. Lin, Feng-Jyh, 2010. "The determinants of foreign direct investment in China: The case of Taiwanese firms in the IT industry," Journal of Business Research, Elsevier, vol. 63(5), pages 479-485, May.
    4. Sanjaya Lall, 1980. "Monopolistic Advantages and Foreign Involvement by US Manufacturing Industry," Palgrave Macmillan Books, in: The Multinational Corporation, chapter 1, pages 3-28, Palgrave Macmillan.
    5. Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 2003. "Financial Factors and Investment in Belgium, France, Germany, and the United Kingdom: A Comparison Using Company Panel Data," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 153-165, February.
    6. Jaya Prakash Pradhan, 2004. "The determinants of outward foreign direct investment: a firm-level analysis of Indian manufacturing," Oxford Development Studies, Taylor & Francis Journals, vol. 32(4), pages 619-639.
    7. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0, September.
    8. Hennart, J.M.A., 2012. "Emerging market multinationals and the theory of the multinational enterprise," Other publications TiSEM 23818daa-f6ed-4fd6-bca4-3, Tilburg University, School of Economics and Management.
    9. Trevino, Len J. & Grosse, Robert, 2002. "An analysis of firm-specific resources and foreign direct investment in the United States," International Business Review, Elsevier, vol. 11(4), pages 431-452, August.
    10. Joel Deichmann & Socrates Karidis & Selin Sayek, 2003. "Foreign direct investment in Turkey: regional determinants," Applied Economics, Taylor & Francis Journals, vol. 35(16), pages 1767-1778.
    11. John Dunning, 2001. "The Eclectic (OLI) Paradigm of International Production: Past, Present and Future," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(2), pages 173-190.
    12. Lecraw, Donald J, 1977. "Direct Investment by Firms from Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 29(3), pages 442-457, November.
    13. Yadong Luo & Rosalie L Tung, 2007. "International expansion of emerging market enterprises: A springboard perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 481-498, July.
    14. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    15. Jan Johanson & Finn Wiedersheim‐Paul, 1975. "The Internationalization Of The Firm — Four Swedish Cases 1," Journal of Management Studies, Wiley Blackwell, vol. 12(3), pages 305-323, October.
    16. Peter J Buckley & L Jeremy Clegg & Adam R Cross & Xin Liu & Hinrich Voss & Ping Zheng, 2007. "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 499-518, July.
    17. Jens Beckert, 2003. "Economic Sociology and Embeddedness: How Shall We Conceptualize Economic Action?," Journal of Economic Issues, Taylor & Francis Journals, vol. 37(3), pages 769-787, September.
    18. John H. Dunning & Sarianna M. Lundan, 2008. "Multinational Enterprises and the Global Economy, Second Edition," Books, Edward Elgar Publishing, number 3215, December.
    19. Shige Makino & Chung-Ming Lau & Rhy-Song Yeh, 2002. "Asset-Exploitation Versus Asset-Seeking: Implications for Location Choice of Foreign Direct Investment from Newly Industrialized Economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 403-421, September.
    20. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    21. Kotabe, Masaaki & Kothari, Tanvi, 2016. "Emerging market multinational companies’ evolutionary paths to building a competitive advantage from emerging markets to developed countries," Journal of World Business, Elsevier, vol. 51(5), pages 729-743.
    22. Saime Suna KAYAM & Mehtap HİSARCIKLILAR, 2009. "Türkiye’den çıkan doğrudan yatırımları belirleyen etmenler, 1992-2005," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 24(280), pages 47-70.
    23. Alvaro Cuervo-Cazurra & Mehmet Genc, 2008. "Transforming disadvantages into advantages: developing-country MNEs in the least developed countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 39(6), pages 957-979, September.
    24. Jindra, Björn & Hassan, Sohaib S. & Cantner, Uwe, 2016. "What does location choice reveal about knowledge-seeking strategies of emerging market multinationals in the EU?," International Business Review, Elsevier, vol. 25(1), pages 204-220.
    25. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    26. NS Siddharthan & Stanley Nollen, 2004. "MNE Affiliation, Firm Size and Exports Revisited: A Study of Information Technology Firms in India," Journal of Development Studies, Taylor & Francis Journals, vol. 40(6), pages 146-168.
    27. Blomstrom, Magnus & Lipsey, Robert E, 1991. " Firm Size and Foreign Operations of Multinationals," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(1), pages 101-107.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gilbert Kofi Adarkwah & Tine Petersen Malonæs, 2022. "Firm-specific advantages: a comprehensive review with a focus on emerging markets," Asia Pacific Journal of Management, Springer, vol. 39(2), pages 539-585, June.
    2. Gammeltoft, Peter & Cuervo-Cazurra, Alvaro, 2021. "Enriching internationalization process theory: insights from the study of emerging market multinationals," Journal of International Management, Elsevier, vol. 27(3).
    3. Chabowski, Brian R. & Samiee, Saeed, 2023. "A bibliometric examination of the literature on emerging market MNEs as the basis for future research," Journal of Business Research, Elsevier, vol. 155(PB).
    4. Knoerich, Jan & Vitting, Simon, 2021. "The distinct contribution of investment promotion agencies’ branch offices in bringing Chinese multinationals to Europe," Journal of World Business, Elsevier, vol. 56(3).
    5. Exequiel Hernandez & Mauro F Guillén, 2018. "What’s theoretically novel about emerging-market multinationals?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(1), pages 24-33, January.
    6. Luo, Yadong & Zhang, Huan, 2016. "Emerging Market MNEs: Qualitative Review and Theoretical Directions," Journal of International Management, Elsevier, vol. 22(4), pages 333-350.
    7. Chris Wagner, 2020. "Deducing a state-of-the-art presentation of the Eclectic Paradigm from four decades of development: a systematic literature review," Management Review Quarterly, Springer, vol. 70(1), pages 51-96, February.
    8. Buckley, Peter J. & Munjal, Surender & Enderwick, Peter & Forsans, Nicolas, 2016. "Cross-border acquisitions by Indian multinationals: Asset exploitation or asset augmentation?," International Business Review, Elsevier, vol. 25(4), pages 986-996.
    9. Oludotun Fasanya, David & Ingham, Hilary & Read, Robert, 2022. "Determinants of internationalisation by firms from Sub-Saharan Africa," Journal of Business Research, Elsevier, vol. 144(C), pages 951-965.
    10. Yong Yang & Pedro S. Martins & Nigel Driffield, 2013. "Multinational Performance and the Geography of FDI," Management International Review, Springer, vol. 53(6), pages 763-794, December.
    11. Cai, Huifen & Boateng, Agyenim & Guney, Yilmaz, 2019. "Host country institutions and firm-level R&D influences: An analysis of European Union FDI in China," Research in International Business and Finance, Elsevier, vol. 47(C), pages 311-326.
    12. Yiping Huang & Bijun Wang, 2013. "Investing Overseas Without Moving Factories Abroad: The Case of Chinese Outward Direct Investment," Asian Development Review, MIT Press, vol. 30(1), pages 85-107, March.
    13. Mehmet Demirbag & Martina McGuinness & Hüseyin Altay, 2010. "Perceptions of Institutional Environment and Entry Mode," Management International Review, Springer, vol. 50(2), pages 207-240, April.
    14. Demirbag, Mehmet & Tatoglu, Ekrem & Glaister, Keith W., 2009. "Equity-based entry modes of emerging country multinationals: Lessons from Turkey," Journal of World Business, Elsevier, vol. 44(4), pages 445-462, October.
    15. Tolentino, Paz Estrella, 2008. "The determinants of the outward foreign direct investment of China and India: Whither the home country?," MERIT Working Papers 2008-049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Peter J. Buckley, 2018. "Internalisation Theory and Outward Direct Investment by Emerging Market Multinationals," Management International Review, Springer, vol. 58(2), pages 195-224, April.
    17. Joseph A. Clougherty & Jin Uk Kim & Bradley R. Skousen & Florian Szücs, 2017. "The Foundations of International Business: Cross-Border Investment Activity and the Balance between Market-Power and Efficiency Effects," Journal of Management Studies, Wiley Blackwell, vol. 54(3), pages 340-365, May.
    18. Ramírez-Alesón, Marisa & Fleta-Asín, Jorge, 2016. "Is the Importance of Location Factors Different Depending on the Degree of Development of the Country?," Journal of International Management, Elsevier, vol. 22(1), pages 29-43.
    19. Sosa Andrés, Maximiliano & Nunnenkamp, Peter & Busse, Matthias, 2013. "What drives FDI from non-traditional sources? A comparative analysis of the determinants of bilateral FDI flows," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-53.
    20. Moghaddam, Kaveh & Sethi, Deepak & Weber, Thomas & Wu, Jun, 2014. "The Smirk of Emerging Market Firms: A Modification of the Dunning's Typology of Internationalization Motivations," Journal of International Management, Elsevier, vol. 20(3), pages 359-374.

    More about this item

    Keywords

    Outward Foreign Direct Investment; outward FDI; Probit; Logit; Turkey;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • G1 - Financial Economics - - General Financial Markets
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ana:wpaper:19001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Unal Tongur (email available below). General contact details of provider: https://edirc.repec.org/data/ewanatr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.