The Determinants of Turkish Outward Foreign Direct Investment

doi:10.4236/me.2011.25080

Paper Menu >>

Journal Menu >>

Modern Economy, 2011, 2, 717-728

doi:10.4236/me.2011.25080 Published Online November 2011 (http://www.SciRP.org/journal/me)

717

The Determinants of Turkish Outward Foreign

Direct Investment

İbrahim Anıl1, Ismail Armutlulu1, Cem Canel2, Rebecca Porterfield2

1Faculty of Business Administration and Economics, Department of Busi ness Ad mi nist ration, Marmara University,

Istanbul, Turkey

2Cameron School of B usiness, University of North Carolina Wilmington, Wilmington, USA

E-mail: [email protected]

Received July 12, 2011; revised August 20, 2011; accepted September 29, 2011

Abstract

The general theory of Foreign Direct Investment (FDI) has been built on the experience of developed coun-

tries’ investors. Therefore, there is an extensive amount of literature about firm behaviors in developed

countries. Some researchers have started investigating why, how and when developing countries’ firms en-

gage in outward FDI. All of these studies have shown that the FDI determinants of firms in newly industrial-

ized economies (NIEs) are different from the FDI determinants of firms in developed economies. This study

investigates the entry mode and location choice determinants of Turkish firms’ outward direct investments,

which are operating in Central Asia, Russia and Balkan Countries, over the period of 1989 to 2005. We find

that these investments are associated with high levels of economic and political risks, cultural proximity and

lack of ownership advantages. The main purpose of this study is to provide new evidence for these NIE’s

outward determinants.

Keywords: International Business, Manufacturing, Foreign Direct Investment

1. Introduction

Many individual Turkish entrepreneurs made invest-

ments during the period of 1989-2005 in the Turkic Re-

publics where new market economies emerged following

the dissolution of the Soviet Union. These activities were

regarded as investment opportunities. Although there

have been some studies related specifically to FDI in

some Turkic countries [1] there have been few studies

about the Turkish FDI’s, analyzing why and how those

companies chose outward countries for FDI, their com-

petitors, and their performances in those countries.

The direct foreign capital investments of Turkish firms

most of which emerged as international firms in this re-

gion, reached 4644 billion YTL by 2007. Few interna-

tional competitors entered these markets, due to percep-

tions of the high levels of risk and uncertainties involved.

Turkish firms, however, have maintained their activities

with considerably high performance. This phenomenon

cannot be explained through existing international direct

investment theories or by current studies on global

emerging firms. The involvement of emerging country

firms in direct foreign investment is a wholly original

phenomenon in terms of theories of direct investment.

Therefore, in this study, data from 107 firms and 169

facilities that directly invested in four Turkic Republics,

Bulgaria, Romania and Russia were collected through

surveys and in-depth interviews in order to discover the

determinants of the investment and location decision

making of these firms and the fundamental dynamics of

the global emerging firms.

In order to ensure an accurate comparison with devel-

oped countries’ determinants, the factors affecting the

decision making processes of the survey group were ob-

tained using the same determinants used to identify the

factors within developed countries. Most of the Turkish

firms that went to the Turkic Republics for direct in-

vestment decided to find new markets and to use the

competitive advantage of being the first to enter into the

market. Those firms, which found cheap goods, labor,

and quality resources decided to invest in these markets

only to find appropriate resources whilst totally ignoring

the domestic market. Ironically, some of them wanted to

export those products. This study explains the research

findings and relates them to existing theories. The next

section provides the theoretical framework for this study,

İ. ANIL ET AL.

718

section three presents the research findings and section

four provides conclusions.

2. Theoretical Framework

The majority of the information regarding international

business administration is based upon analysis of the

behavior of firms in developed countries. All the existing

theories of direct investment have been shaped and de-

veloped in order to explain the behaviors of the firms in

developed countries. Bucklet et al., [2] noted that in-

vestment by developing countries in developed or de-

veloping markets has emerged as a recent focus of re-

search, generally applying existing theories. With the

exception of analysis of motivation for FDI in Bulgaria

[1], many of the FDI strategies have focused on industry

specific motivations [3-5].

The direct capital investments of Turkish firms and of

international entrepreneurs display characteristics which

differ from the behavior of companies from other devel-

oping countries. Hymer [6] used the industrial organiza-

tion approach to explain the direct foreign capital in-

vestments to developed, and developing countries. Sev-

eral researchers [7-9] attempted a similar analysis util-

izing the internalization approach which focuses on the

motivation of coordinating interconnected functions for

purposes of cost reduction and knowledge sharing. Dun-

ning [10-12] maintained that the internationalization of

production is such a complex process that it cannot be

explained by a single theory or approach, and as a re-

sponse developed the more comprehensive eclectical

approach created from a synthesis of these two ap-

proaches. Other theories developed during the same pe-

riod include the competitive international industry ap-

proach by Vernon [13,14] studies by Kojima [15] to ex-

plain Japan’s direct investments, and lastly, foreign capi-

tal theories based on firm growth theories by Penrose [16]

and Screiber [17]. Dunning’s eclectical approach, also

referred to as the Ownership, Location and Internaliza-

tion (OLI) approach, maintains a strong position in re-

cent studies [18] According to the OLI approach direct

capital investments have the advantages of ownership,

benefiting from economies of scale, the skills of tech-

nology, patent advantage, brand development and unique

management skills allowing for duplication in other geo-

graphic locations. The advantages of location are the

natural resources of the country, the size of the domestic

market, the low input costs such as energy and labor, and

taxes and subventions. In the internalization set, the ob-

jective is usually to make use of the existing deficient

competitor conditions in these countries. In this frame-

work, two of the three basic motives in Dunning’s ap-

proach were taken as the basis of the analysis of deter-

minants of direct investments. Thus, those investing in

order to seek market or to seek cheap resources (Effi-

ciency Seeking) have been grouped separately and the

differences between them have been explained [10,19].

Global borning firms are the new phenomena in inter-

national business literature. Having been established

without passing through the Uppsala model which re-

sembles Penrose’s company growth theories [20] and

through the phases conceptualized in innovation models

[21] these companies [22] have been internationalized by

reaching the level at which they can sell at least one

quarter of their goods abroad within the first three years

of their existence. The studies that have been conducted

to explain the behavior of the companies in this area [23-

26] aim to specify the dynamics of global born firms.

International born Turkish firms, apart from those, which

are global borning firms, are those whose first foundation

took place abroad without any ownership advantage.

Following the dissolution of the Soviet Union, Turkish

companies were established in the newly-independent

countries as international firms in order to take advan-

tage of the developed countries’ avoidance of these

“risky” emerging economies and thus operate in markets

free of competition. They were established without con-

cern for the level of technological development so as to

benefit from the opportunities presented by the market.

Based on the assumption that they would not face com-

petition for a long period, firms even accepted the risks

of high costs of implementing the contracts. Some of the

Turkish companies operating in developing markets such

as Romania, Turkmenistan, Kazakhstan and Bulgaria

play important roles in those domestic competitive mar-

kets, with billion dollar annual revenues, the developed

technology, the distribution channels and the managerial

skills they possess. Findings about the international

borning Turkish firms are not familiar to scholars study-

ing international investment theories. The emergence

into the global economy of Turkish firms has not been

the focus of attention amongst theorists and thus, cannot

be explained within the framework of generally accepted

theories of direct foreign capital investment.

3. Methodology and Research Findings

3.1 Method

This study focused on identifying the determinants of

Turkish FDI’s in seven countries based on an eques-

tionnaire survey format developed by Tatoglu and Glais-

ter [27]. The questionnaire was given to 107 firms with

wholly owned subsidiaries and 169 facilities in Bulgaria,

Romania, Uzbekistan, Kazakhstan, Turkmenistan, Kyr-

gyzstan and Russia. We personally went to the countries

İ. ANIL ET AL.

719

and asked the managers who made the investment deci-

sions to fill out the survey forms. With the Foreign Eco-

nomic Relations Board and the country’s commerce

consulates, we formed a sample which is calculated from

the total census by analyzing the businesses with more

than fifty employees. According to our list 20 companies

did not wish to participate in the survey, and we had an

84% response rate. As it can be seen from the total in-

vestment amounts shown in Table 1, the majority of the

companies consist of small-scale businesses. The average

investment amount is 1,704,241 dollars. Table 2 shows

the industrial distribution of our sample. The 107 com-

panies in our sample had operations in 129 different sec-

tors. Some of the companies had more than one factory

in the same sector, which provided us with 169 compa-

nies in our data set.

In this study we used the survey form developed by

Tatoglu and Glaister [28]. Tatoglu and Glaister [29] pro-

vide the details for the development, accuracy and con-

fidence results of the survey form. The survey form en-

abled us to compare the results by developed and devel-

oping countries. In our study we used a survey form con-

sisting of 16 sections besides the beginning section where

company information is presented. Table 3 provides a

summary of each of the sixteen sections.

3.2. Results and Findings

Table 4 addresses the motivations for country choice by

asking “How important were the following factors in

your decision to choose the country as a location for in-

vestment?” For this study a new question; “to have the

advantage of being the first to enter the market” was ad-

ded to the questionnaire form. The survey and results

follow:

Choosing the magnitude of the average as the criterion,

the most important factor in determining the choices of

country is the “Advantage of being the first to enter the

market” with an average score of 4.743. Other important

determinant factors are, “Purchasing power of custom-

ers” (3.718) in second position “Level of competition in

Industry” third (3.717), “Growth rate of the country”

(3.715) fourth, “Size of the Market” fifth (3.463.), “Pos-

sibility of obta ining low cost inpu ts” sixth (3.438), “Easy

access to markets of neighboring countries” seventh

(3.374), and “Return of the Profit to the country of ori-

gin” (3.313), in the eighth position. Market motivation is

consistent with the Bitzenis [30] (2007) findings.

According to the analyses conducted with the second-

dary data (population, national income level, population

size of the Turkish minority, and national income per

capita of the country) it can be seen in Table 5 that there

is no correlation between the level of investment pro-

vided by the Turkish firms and the population, national

income level, population size of the Turkish minority,

and national income per capita of the country. Similar to

the foreign investments by China, Turkish firms invest

more in countries where there are Turkish or Turkic mi-

norities in the framework of cultural similarity. [31] The

study by Buckley et al., [31] provides the data and

analysis related to China.

The Kaiser-Meyer-Olkin measure of sampling adequa-

cy tests whether the partial correlations among variables

are small. Bartlett’s test of sphericity tests whether the

correlation matrix is an identity matrix, which would

indicate that the factor model is inappropriate. The next

item from the output is the Kaiser-Meyer-Olkin (KMO)

and Bartlett’s test. The KMO measures the sampling

adequacy which should be greater than 0.5 for a satisfac-

tory factor analysis to proceed. Looking at Table 5, the

KMO measure is 0.605. From the same table, we can see

that the Bartlett’s test of sphericity is significant. That is,

its associated probability is less than 0.05. In fact, it is

actually 0.000. This means that the correlation matrix is

not an identity matrix.

3.2.1. Distribution of the Determinants in the Seven

Countries

Our analysis showed that 64 of the 107 firms were

Table 1. Countries and companies used in the study.

Countries Number of

Companies

Small size and

Construction Companies

Number of Target

Companies

Number of responding

Companies

Number of non-responding

Companies

Total Exported

Capital (*)

Türkmenistan 25 16 9 6 3 57551.386

Russia 128 105 23 22 1 188990.715

Romania 166 136 30 27 3 151281.240

Uzbekistan 79 60 19 17 2 37765.125

Kyrgyzstan 17 6 11 10 1 24148.093

Kazakhistan 100 85 15 11 4 444157.768

Bulgaria 56 36 20 14 6 69227.331

Total 571 444 127 107 20 973121658

Resource: (*) http.www.hazine.gov.tr (Undersecretariat of Treasury statistics (2005).

İ. ANIL ET AL.

720

Table 2. Distribution of the industry sectors used in the

study.

Industry A B C D E F GH I K L M N Total

Total 3 6 25 16 14 3 221 9 7 6 2 15129

A: Auto, transport; B: Electronics and electrical machinery; C: Food/Drink

Manufacturing; D: Textile, apparel and leather; E: Computer and software;

F: Metal, iron and steel; G: Other manufacturing; H-Export-import trading; I:

Tourism, K: Financial services; L: Architecture, construction services; M:

Transport; N: Other services.

our analysis showed that 64 of the 107 firms were “mar-

ket seeking” and 43 were “resource seeking”. Table 6

shows how many firms in each of the countries in-

cluded in our study was “resource seeking” and how

many were “market seeking”. It is interesting to note that

all of the firms investing in Turkmenistan were “resource

seeking” and 21 out of the 22 firms investing in Russia

were “market seeking” and 9 out of the 11 firms invest-

ing in Kazakhstan were also “market seeking”. The num-

ber of “resource seeking” and “market seeking” firms in

the other four countries does not seem to be significantly

different. Table 6 shows the results of the chi-square test

where Turkmenistan and Kyrgyzstan are combined in the

first phase. In the second phase Romania and Kazakhstan

are combined and the hypothesis of Ho: Row and Col-

umns are independent is tested with 5 degrees of freedom

in the first phase and 4 degrees of freedom in the second

phase. In both phases, this hypothesis could not be re-

jected.

Table 3. Summary of the survey form.

SectionQuestions’ coverage

1 Company’s major activity and relations with the other sectors

2 Company’s entry strategy

3 Factors that affect the entry strategy

4 Motivation factors

5 Company’s perceptions of its strengths

6 Performance expectations related to various criteria and their

satisfaction level

7 Overall performance of investments

8 The performance of the company’s investments compared to

home country operations

9 Performance compared to the competitors in the country of

investment

10 Managerial control over the investment

11 Management problems areas and their frequency

12 Similarity of cultures between the host country and company

13 Percentage of the products purchased from the main company

14 Percentage of the products purchased from the investment

company

15 The existence of the relationship with the host country before

the investment and the form of existing relationship

16 The factors and how much they are considered during the in-

vestment period

Table 4. Host country factors for wholly owned subsidiary (WOS) formation. How important were the following factors in

your decision to choose the Country as a location for the WOS or JV? (1 = of no importance, 5 = of major importance).

Question Factor Average

1 Market size 3.463

2 Growth rate of the country’s economy 3.715

3 Political stability in the country 2.654

4 Economic stability in the country 2.673

5 Infrastructure development level in the country 2.654

6 Possibility of obtaining qualified local labor 2.415

7 Foreign investment policy of the government 3.000

8 Possibility of obtaining subventions 2.075

9 Cost of international transportation and communication 2.687

10 Return of profit to the country of origin 3.313

11 Possibility of obtaining qualified inputs 2.396

12 Possibility of obtaining low cost inputs 3.438

13 Tax advantages 3.986

14 Geographical proximity 2.692

15 Level of trade unionism 1.358

16 Purchasing power of customers 3.718

17 Level of competition in industry 3.717

18 Easy access to markets in neighboring countries 3.374

19 Advantage of being the first to enter the market 4.743

721

İ. ANIL ET AL.

Table 5. Explanatory factor analysis. (a) Turkish investment amounts and average per capita income, population, the ratio of

the Turkish Minority and the relation between magnitude of the national income.

Kaiser-Meyer-Olkin Measure of Sampling Adequacy.* 0.605

Bartlett’s Test of Sphericity** Approx. Chi-Square 472,612

Df 120

Sig.

a0.000

aBased on correlations; Rotated Component Matrix.

Component

1 2 3 4 5

Economic Stability 0.892 0.046 0.129 –0.029 0.155

Political Stability 0.889 0.059 0.113 –0.095 0.149

Repatriability of Profit 0.414 0.156 –0.055 0.280 –0.239

Access to other markets 0.196 0.839 –0.010 0.189 –0.154

Availability of low cost inputs –0.092 0.734 0.043 –0.040 0.283

Availability of qualified inputs 0.144 0.578 –0.012 0.189 0.468

Market size 0.071 0.045 0.882 –0.125 0.005

Purchasing power of customers –0.084 –0.167 0.790 0.021 –0.072

Growth rate of economy 0.388 0.170 0.590 0.135 –0.053

Degree of unionization 0.180 0.230 0.320 0.147 0.126

Geographical proximity –0.361 –0.011 0.072 0.814 –0.128

International Transport and communication cost 0.108 0.114 –0.061 0.792 0.018

Level of Infrastructure 0.241 0.344 0.164 0.457 0.142

Tax advantages 0.157 0.309 –0.087 0.219 0.729

Level of industry competition –0.200 –0.299 0.304 –0.295

0.494

First enter to the market 0.036 0.032 –0.018 –0.045

0.261

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a Rotation converged in 8 iterations.

(a)

Population Per capita incomeNational incomeTurkish InvestmentTotal Investment Turkish minority

Population

Pearson Correlation

Sig. (2-tailed)

0.541

0.210

0.989**

0.000

0.170

0.716

–0.203

0.662

–0.591

0.217

Per Capita income Pearson Correlation

Sig. (2-tailed)

0.541

0.210

0.616

0.141

0.477

0.279

0.595

0.159

–0.845*

0.034

National income Pearson Correlation

Sig. (2-tailed)

0.989**

0.000

0.616

0.141

0.206

0.657

–0130

0.781

–0.645

0.167

Turkish Investment Pearson Correlation

Sig. (2-tailed)

0.170

0.716

0.477

0.279

0.206

0.657

0.104

0.825

–0.183

0.729

Total investment

Pearson Correlation

Sig. (2-tailed)

–0.203

0.662

0.595

0.159

–0130

0.781

0.104

0.825

–0.668

0.147

Turkish minority Pearson Correlation

Sig. (2-tailed)

–0.591

0.217

–0.845*

0.034

–0.645

0.167

–0.183

0.729

–0.668

0.147

The data used for the analysis of the secondary data was obtained from the related country’s statistics (World Investment Report, United Nations Statistics and

the Undersecretariat of Treasure Statistics 2005).

İ. ANIL ET AL.

722

Table 6. Firms distribution according to investing reasons.

COUNTRIES Total

Turkmenistan Bulgaria Kýrgyzstan Kazakhstan Romania Uzbekistan Russia

Resource Seeking 6 7 6 2 11 10 1 43

Market Seeking 0 7 4 9 16 7 21 64

Total 6 14 10 11 27 17 22 107

3.2.2. Results of the Factor Analysis Based on the

Identified Criteria

When explanatory factor analysis is applied to the nine-

teen criteria of investment determinants, the results are

distributed under 5 factors as shown in Table 7. The

main reason to apply the factor analysis techniques is 1)

to reduce the number of variables and 2) to detect struc-

ture in the relationships between the variables (to classify

them to the most appropriate category).

The criteria “Possibility of obtaining qualified local

labor” in question 6, “Foreign investment policy of the

government” in question 7, and “Possibility of obtaining

subventions” in question 8 were removed from the dif-

ferentiating list since they were associated with more

than one factor. The first factor consists of criteria that

constitute the risk factor: “Economic stability in the

country” in question 4, “Political stability in the country”

in question 3, “Return of the profit to the country of ori-

gin” in question 10. The second factor consists of criteria

that constitute the resource factor: “Easy access to mar-

kets of neighboring countries” in question 18, “Possibil-

ity of obtaining low cost inputs” in question 12, “Possi-

bility of obtaining qualified inputs” in question 11. The

third factor consists of criteria that constitute the market

factor: “Size of the market” in question 1, “Purchasing

power of the customer” in question 16, “Growth rate of

the country’s economy” in question 2, “Level of trade

unionism” in question 15. The fourth factor consists of

criteria that constitute the logistics factor: “Geographical

proximity” in question 14, “Costs of international trans-

portation and communication” in question 9, “Level of

development of infrastructure in the country” in question

5. The fifth factor consists of the criteria that constitute

the competition factor: “Tax advantages” in question 13,

“Level of competition in industry” in question 17, and

the “Advantage of being the first to enter the market” in

question 19.

3.2.3. Differences between the Groups in Terms of the

Market and Resource Factors

Among the investment motives of the Turkish firms, it is

possible to find two of the three motives that Dunning

Table 7. Rotated component matrix.

Component

1 2 3 4 5

Economic Stability 0.892 0.046 0.129 –0.029 0.155

Political Stability 0.889 0.059 0.113 –0.095 0.149

Repatriability of Profit 0.414 0.156 –0.055 0.280 –0.239

Access to other markets 0.196 0.839 –0.010 0.189 –0.154

Availability of low cost inputs –0.092 0.734 0.043 –0.040 0.283

Availability of qualified inputs 0.144 0.578 –0.012 0.189 0.468

Market size 0.071 0.045 0.882 –0.125 0.005

Purchasing power of customers –0.084 –0.167 0.790 0.021 –0.072

Growth rate of economy 0.388 0.170 0.590 0.135 –0.053

Degree of unionization 0.180 0.230 0.320 0.147 0.126

Geographical proximity –0.361 –0.011 0.072 0.814 –0.128

International Transport and communication cost 0.108 0.114 –0.061 0.792 0.018

Level of Infrastructure 0.241 0.344 0.164 0.457 0.142

Tax advantages 0.157 0.309 –0.087 0.219 0.729

Level of industry competition –0.200 –0.299 0.304 –0.295 0.494

First enter to the market 0.036 0.032 –0.018 –0.045 0.261

xtraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. aRotation converged in 8 iterations.

723

İ. ANIL ET AL.

used in his eclectical approach: investing to seek markets

and resources. The two groupings have been used since

the companies in this region do not have the opportunity

to engage in international growth [32] in order to seek

strategic resources and markets.

The firms investing to seek markets were distin-

guished according to factor analysis, from those invest-

ing to seek resources. Their distribution throughout the

countries in the study is presented in Table 6. Although

the size of the market is a determinant in all studies [33]

for a considerable number of the Turkish firms (33%) it

is an unimportant factor in their decisions. The size of

the domestic market for international borning Turkish

firms is seen as an important determinant with a 90%

reliability level as shown in Table 8.

3.2.4. Analysis of the Advantages of Ownership and

Location

For all the countries in the study, the potential motive-

tions were measured based on the results from the fourth

section of the questionnaire by the fields of benefiting

from economies of scale, better resource and capacity

use, qualified and privileged access to inputs, presence in

new markets, opportunity for rapid entry into markets,

investment profitability, harmony with Turkish govern-

ment policy, cost of contracting and implementation,

avoiding the risk of misusing production information,

ensuring sufficient quality control, insufficient legisla-

tion on patent and license rights, inability to make tech-

nology transfers through licensing and patents, and in

agencies and licensing. The “gain presence in new mar-

kets” by a score of 4.79 out of 5, “opportunity for rapid

entry into markets” by a score of 4.25, and “investment

profitability” by a score of 3.97 are the important factors

and the others scoring below an average of 2.5 are the

non-significant factors.

International experience, brand and product image,

practicing level of technology and managerial informa-

tion, experience in markets of the chosen country, quality

of staff improvement program, staff quality and product

differentiation and development skills were measured

(based on the results from the fifth section of the ques-

tionnaire) as the starting advantages (Ownership) of the

firms. It was observed that the founders of the firms,

which were born in the country invested in, had interna-

tional experience by a rate of 2.45/5, practicing level of

technology and managerial information by 2.75/5, and

the quality of staff improvement program by 2.55/5,

whereas they do not possess any of the other starting

advantages. The starting advantages for the firms, which

originated in Turkey, are above the average of 4.5/5, thus,

they fulfill the conditions of traditionally international-

ized firms [6,10,19,34].

No statistically significant difference was found be-

tween the averages except for product differentiation and

development skills, when the starting advantages of

those investing for market and those for export were

compared in terms of Turkish investments. It could be

seen that those investing for the market possess product

differentiation and development skills, whereas those

investing to export their existing products do not possess

a high degree of these skills as presented in Table 9.

When the same comparison is made for the direct in-

vestments by Turkish owned firms, Table 10 shows that

Table 8. The relationship between the birthplace of the firms and the reasons of expatriation.

QUESTION 2d Total

Founded in Turkey Founded Abroad

Resource Seek 0.00 Count 12 31 43

Expected Count 16.5 26.5 43.0

Market Seek 1.00 Count 29 35 64

Expected Count 24.5 39.5 64.0

Total Count 41 66 107

Expected Count 41.0 66.0 107.0

Chi-Square Tests.

Value dfAsymp. Sig. (2-sided)Exact Sig. (2-sided) Exact Sig. (1-sided)

Pearson Chi-Square 3297 1.069

Continuity Correction 2601 1.107

Likelihood Ratio 3360 1.067

Fisher’s Exact Test .104 .053

Linear-by-Linear Association 3266 1.071

N of Valid Cases 107

aComputed only for a 2 × 2 table; b0 cells (.0%) have expected count less than 5. The minimum expected count is 16.48.

İ. ANIL ET AL.

724

Table 9. The relationship between the reasons of expatriation and the starting advantages (for all firms).

Levene’s Test for Equality

of Variances t-test for Equality

of Means

F Sig.T dfSig.

(2-tailed)

Mean Differ-

ence

Std. Error

Difference

International experience of

company

Equal variances

assumed 0.033 0.857–1.096 950.276 –0.399 0.3638

Equal variances not

assumed –1.101 77.5010.274 –0.399 0.3621

Trade Mark and Brand Image Equal variances

assumed 0.074 0.786–0.100 950.921 –0.039 0.3889

Equal variances not

assumed –0.100 76.2550.921 –0.039 0.3891

Technological and

managerial know-how

Equal variances

assumed 4.232 0.042–0.402 940.688 –0.137 0.3403

Equal variances not

assumed –0.419 86.4000.676 –0.137 0.3266

Experience of foreign market Equal variances

assumed 0.004 0.950–1.404 950.164 –0.498 0.3550

Equal variances not

assumed –1.396 75.0260.167 –0.498 0.3570

Quality of training programs Equal variances

assumed 0.286 0.594–0.720 940.473 –0.234 0.3253

Equal variances not

assumed –0.717 75.4960.476 –0.234 0.3268

Quality of personnel Equal variances

assumed 1.431 0.235–1.304 920.195 –0.473 0.3625

Equal variances not

assumed –1.285 70.7980.203 –0.473 0.3679

Ability to develop

differentiated

Equal variances

assumed 3.327 0.071–2.898 940.005 –0.967 0.3335

Equal variances not

assumed –2.991 84.2310.004 –0.967 0.3232

there is a significant difference between the averages of

those firms that possess a high degree of technology and

high managerial information practicing level (with p-

value 0.018), experience in foreign country markets

(with p-value 0.015), staff quality (probability of type I

error 0.048) and product differentiation and development

skills (probability of type I error 0.001) went to invest in

those countries for the market. The propensity to make

use of these advantages is observed in the investments of

the Turkish firms which invested to search for markets.

The variables shown in Table 9 are based on the fifth

section of the questionnaire.

3.2.5. Analysis of Findings on Risk Taking

The risk-taking behavior of traditionally international-

ized firms is explained by a correlation with the amount

of expected inputs [33,35]. Buckley et al., [31] verified

that the phenomenon of highly risk-laden direct capital

investments ventured by China is also true for the foreign

investments by Turkish firms. All of the Turkish firms,

except for one operating in Uzbekistan, work at high

performance as measured in the seventh section of the

questionnaire. It is seen that they have made their in-

vestments without considering the risk aspect [36] which

verifies the findings of previous studies. No correlation

has been found between (United Nations Conference on

Trade and Development’s (UNCTAD) data on the total

investment countries receive and the data of the Under-

secreteriat of Treasury of the Turkish Republic. The

same is true for risk factor data and COFACE (Country

Risk Rating) risk index data. The results are shown in

Table 11. Political stability was measured on a 1 - 5

likert scale based on the responses to questions three in

the third section of the questionnaire.

Based on these results, there is no difference in the

importance between those that responded negatively and

positively to the criterion of implementation cost of con-

racts. Those who claimed that it was unimportant ex- t

725

İ. ANIL ET AL.

Table 10. The relationship between the reasons of expatriation and the starting advantages (for the firms located in Turkey).

Levene’s Test for Equality

of Variances t-test for Equality

of Means

F Sig.T dfSig.

2-tailed

Mean Dif-

ference

Std.Error Dif-

ference

International experience of

company

Equal variances

assumed 0.203 0.655–1.557 390.127 –0.749 0.4807

Equal variances not

assumed –1.513 19.3930.146 –0.749 0.4947

Trade mark and Brand image Equal variances

assumed 0.907 0.347–1.010 390.319 –0.428 0.4239

Equal variances not

assumed –0.943 17.9460.358 –0.428 0.4538

Technological and managerial

know-how

Equal variances

assumed 0.799 0.377–2.482 380.018 –0.631 0.2542

Equal variances not

assumed –2.189 16.2760.043 –0.631 0.2882

Experience of foreign market Equal variances

assumed 1.577 0.217–2.558 390.015 –1.374 0.5369

Equal variances not

assumed –2.365 17.6000.030 –1.374 0.5809

Quality of training programs Equal variances

assumed 0.766 0.387–0.763 380.450 –0.196 0.2575

Equal variances not

assumed –0.731 19.0660.474 –0.196 0.2686

Quality of personnel Equal variances

assumed 3.336 0.076–2.045 370.048 –0.630 0.3078

Equal variances not

assumed –1.625 13.7610.127 –0.630 0.3875

Ability to develop differenti-

ated products

Equal variances

assumed 4.163 0.048–3.695 380.001 –1.417 0.3834

Equal variances not

assumed –3.187 15.6680.006 –1.417 0.4445

pressed that they accepted the risk in order to achieve the

required outcome, whereas those that regarded it as

highly important said that this factor ensures a non-

ompetitive environment and so this aspect was very c

İ. ANIL ET AL.

726

Table 11. Turkish firms and their relationship with the risk dimension of all investments.

Total InvestmentTurkish Investment Political Stability Confidence Index

Total Investment Pearson Correlation

Sig. (2-tailed)

0.104

0.825

–0.577

0.175

–0.241

0.603

Turkish Investment Pearson Correlation

Sig. (2-tailed)

0.104

00.825

0.584

0.169

0.143

0.760

Political Stability Pearson Correlation

Sig. (2-tailed)

–0.577

0.175

0.584

0.169

0.246

0.595

Confidant. Index Pearson Correlation

Sig. (2-tailed)

–0.241

0.603

0.143

0.760

0.246

0.595

Total Investment Amounts: UNCTAD, Turkish Investment Amounts: Treasure, Political Stability 3.3 Political Stability Standard and Trust Index: COFACE.

H0: “question 2d and question 48 are independent from each other”. It is rejected at the .05 level of significance.

important in order to sustain the same environment.

None of the Turkish firms surveyed stated that they

invested in order to seek strategic resources, and they

pointed out that the material conditions in the region

were not optimal for investing with such an objective.

Furthermore, it is observed that some of these companies

established in Turkey aim to benefit from the ownership

advantages of OLI when the analyses are conducted on

the basis of different investing strategies.

4. Conclusions

The purpose of this research was to add to the body of

literature in the identification of FDI investments strate-

gies in Turkic countries and to assess the differences

from traditional FDI strategy research in developed ver-

sus less developed countries.

This research studied the highly risk-laden direct in-

vestments of Turkish firms under two sub-groups. Inter-

national borning firms are established and operate on

determinants not explained by existing theories of direct

foreign capital investment. The actions of these compa-

nies are only partially related to location choice factors.

The choice of markets which are not considered from

developed and developing countries due to high cost of

contracts is an exceptional situation peculiar to the seven

countries which are the focus of this current research.

The studies on Foreign Direct Investments examine the

investments from companies and analyze them. In this

study 42 of the companies are established in Turkey,

whereas 65 of them were first established in Turkey

showing that 61% of the companies were first estab-

lished abroad.

There is a dual structure evident in the direct invest-

ments of the Turkish firms in this study. Sixty-four firms

invest in order to be the first to enter the market and to

operate in a non-competitive environment. Those firms

that invested for the market and that possess considerable

starting ownership advantages attach importance to cheap

and qualified inputs as well as to the size of the market

and the purchasing power of the customer. Those com-

panies that invested in order to enter into production in

the investment target countries and to export these goods

to other countries possess less starting ownership advan-

tages as compared to those investing for the market.

Companies setting up production units prefer these coun-

tries because of cheap and quality inputs, low business

taxes and subvention advantages. Attaching no impor-

tance to the domestic market, these firms create a posi-

tive externality in the countries in which they invest by

supporting the development of industry and exports.

This research indicates that strategic motivations for

FDI in Turkic countries are consistent with FDI invest-

ment published on developed and developing countries.

However in all studies no assessment of the historical

origin of the Turkish culture was assessed as to its im-

pact on Turkish investing in Turkics and the correlation

with potential historical cultural implications. This in-

formation may have reduced the perception of risk due to

administrative heritage. A limitation of this study was the

nature of the firms surveyed. Further research should

yield additional factor information based on subsets of

727

İ. ANIL ET AL.

the borning firms related to such issues as entrepreneur-

rial behavior and origins, historic cultural influences as

related to risk taking. Due to the rapidly evolving econo-

mies of these countries, relevance to development stages

could constitute longitudinal studies in better under-

standing the factor influencers as countries go through

different stages of development.

5. References

[1] A. Bitzenis, “Determinants of Foreign Direct Investment:

Evidence from Multinationals in the Post-Crisis Era of

Bulgaria in the Late 1990s,” Southeast European and

Black Sea Studies, Vol. 7, No. 1, March, 2007, pp. 83-

111. doi:10.1080/14683850701189352

[2] J. P. Buckley, J. L. Clegg, R. A. Cross, X. Liu, H. Voss

and P. Zheng, “The Determinants of Chinese Outward

Foreign Direct Investment,” Journal of International

Business Studies, Vol. 38, No. 4, 2007, pp. 499-518.

doi:10.1057/palgrave.jibs.8400277

[3] L. Nachum and S. Zaheer, “The Persistence of Distance?

The Impact of Technology on MNE Motivations for

Foreign Investment,” Strategic Management Journal, Vol.

26, No. 8, 2005, pp. 747-767. doi:10.1002/smj.472

[4] W. Kuemmerle, “The Drivers of Foreign Investment into

Research and Development: An Empirical Investigation,”

Journal of International Business Studies, Vol. 30, No. 1,

1999, pp. 1-24. doi:10.1057/palgrave.jibs.8490058

[5] D. Williams and D. Deslandes, “Motivation for Service

Sector Foreign Direct Investments in Emerging Economics:

Insights from the Tourism Industry in Jamaica,” The

Round Table, Vol. 97, No. 396, 2008, pp. 419-437.

doi:10.1080/00358530802057293

[6] S. H. Hymer, “The International Operations of National

Firms,” The MIT Press, Cambridge, 1976.

[7] P. J. Buckley and M. Casson, “The Optimal Timing of a

Foreign Direct Investment,” Economic Journal, Vol. 91,

No. 361, 1981, pp. 75-87. doi:10.2307/2231697

[8] A. M. Rugman, “Internalization as a General Theory of

Foreign Direct Investment: A Reappraisal of the Litera-

ture,” Weltwirtschaftliches Archive, Vol. 116, No. 2, 1980,

pp. 365-379. doi:10.1007/BF02696864

[9] A. M. Rugman, “Inside the Multinational: The Economics

of Internal Markets,” Croom Helm, London, 1981.

[10] J. H. Dunning, “Trade, Location of Economic Activity

and MNE: A Search for an Eclectic Approach,” In: B.

Ohlin, P. O. Hesselbaum and P. M. Wijkman, Eds., The

International Allocation of Economic Activity, Macmillan,

London, 1977, pp. 398-418.

[11] J. H. Dunning, “International Production and the Multina-

tional Enterprise,” George Allen and Unwin, London,

1981.

[12] J. H. Dunning, “The Eclectic Paradigm of International

Production: A Restatement and Some Possible Exten-

sions,” Journal of International Business Studies, Vol. 19,

No. 1, 1988, pp. 1-31. doi:10.1057/palgrave.jibs.8490372

[13] R. Vernon, “International Investment and International

Trade in Product Cycle,” Quarterly Journal of Economics,

Vol. 80, No. 2, 1966, pp. 190-207. doi:10.2307/1880689

[14] R. Vernon, “The Location of Economic Activity,” In: J.

H. Dunning, Ed., Economic Analysis and Multinational

Enterprise, Allen and Unwin, London, 1974, pp. 89-114.

[15] K. Kojima, “Japanese-Style Direct Foreign Investment,”

Japanese Economic Studies, vol. 4, No. 3, 1986, pp.

50-75.

[16] E. T. Penrose, “Foreign Investment and the Growth of the

Firm,” Economic Journal, Vol. 66, No. 261, 1956, pp.

220-235. doi:10.2307/2227966

[17] J. Schreiber, “US Corporate Investment in Taiwan,” The

Dunellen Compony, New York, 1970.

[18] H. J. Dunning and N. C. Pitelis, “Stephan Hymer’s Con-

tribution to International Business Scholarship: An As-

sessment and Extension,” Journal of International Busi-

ness Studies, Vol. 39, No. 1, 2007, pp. 167-176.

doi:10.1057/palgrave.jibs.8400328

[19] J. H. Dunning, “Multinational Enterprises and Global

Economy,” Addison-Wesley, Wokingham, 1993.

[20] T. J. Steen and W. P. Liesch, “A Note on Penrosean

Growth, Resource Bundles and the Uppsala Model of

Internationalisation,” Management International Review,

Vol. 47, No. 2, 2007, pp. 193-206.

doi:10.1007/s11575-007-0011-7

[21] G. A. Knight and S. T. Çavuşgil, “Innovation, Organiza-

tional Capabilities and the Born-Global Firm,” Journal of

International Business Studies, Vol. 35, No. 2, 2004, pp.

124-141. doi:10.1057/palgrave.jibs.8400071

[22] W. J. Bilkey and G. Tesar, “The Export Behavior of

Smaller Wisconsin Manufacturing Firms,” Journal of

International Business Studies, Vol. 8, No. 1, 1977, pp.

93-98. doi:10.1057/palgrave.jibs.8490783

[23] G. A. Knight and S. T. Çavuşgil, “Innovation, Organiza-

tional Capabilities and the Born-Global Firm,” Journal of

International Business Studies, Vol. 35, No. 2, 2004, pp.

124-141. doi:10.1057/palgrave.jibs.8400071

[24] M. W. Rennie, “Global Competitiveness: Born Global,”

McKinsey Quarterly, Vol. 4, 1993, pp. 45-52.

[25] S. Shane and S. Venkataraman, “The Promise of Entre-

preneurship as a Field of Research,” Academy of Man-

agement Review, Vol. 25, No. 1, 2000, pp. 217-226.

[26] H. Etemad and Y. Lee, “The Knowledge Network of

International Entrepreneurship: Theory and Evidence,”

Small Business Economies, Vol. 20, No. 1, 2003, pp. 5-

23. doi:10.1023/A:1020240303332

[27] E. Tatoglu and K. W. Glaister., “Determinants of Foreign

Direct Investment in Turkey,” Thunderbird International

Business Review, Vol. 40, No. 3, 1998, pp. 279-314.

doi:10.1002/tie.4270400306

[28] E. Tatoglu and K. Glaister, “An Analysis of Motives for

Western DFI in Turkey,” International Business Review,

Vol. 7, No. 2, 1998, pp. 203-230.

doi:10.1016/S0969-5931(98)00006-7

[29] E. Tatoğlu and W. K. Glaister, “Dimensions of Western

İ. ANIL ET AL.

728

Foreign Direct Investment in Turkey,” Quorum Books,

Westport, Connecticut-London, 2000.

[30] A. Bitzenis, “Determinants of Foreign Direct Investment:

Evidence from Multinationals in the Post-Crisis Era of

Bulgaria in the Late 1990s”, Southeast European and

Black Sea Studies, Vol. 7, No. 1, 2007, pp. 83-111.

doi:10.1080/14683850701189352

[31] J. P. Buckley, J. L. Clegg, R. A. Cross, X. Liu, H. Voss

and P. Zheng, “The Determinants of Chinese Outward

Foreign Direct Investment,” Journal of International

Business Studies, Vol. 38, No. 4, 2007, pp. 499-518.

doi:10.1057/palgrave.jibs.8400277

[32] S. Makino, C. M. Lau and R. S. Yeh, “Asset-Expolitation

versus Asset-Seeking: İmplications for Location Choice

of Foreign Direct Investment from Newly Industrialized

Economies,” Journal of International Business Studies,

Vol. 33, No. 3, 2002, pp. 403-421.

doi:10.1057/palgrave.jibs.8491024

[33] A. Chakrabarti, “The Determinants of Foreign Direct

Investment: Sensitivity Analyses of Cross-Country Re-

gressions,” Keyklos, Vol. 54, No. 1, 2001, pp. 89-114.

doi:10.1111/1467-6435.00142

[34] H. J. Dunning, “The Eclectic Paradigm as an Envelope

for Economic and Business Theories of MNE Activity,”

International Business Review, Vol. 9, No. 2, 2000, pp.

163-190. doi:10.1016/S0969-5931(99)00035-9

[35] P. J. Buckley and M. Casson, “The Optimal Timing of a

Foreign Direct Investment,” Economic Journal, Vol. 91,

No. 361, 1981, pp. 75-87. doi:10.2307/2231697

[36] M. Demirbağ, R. Güneş and H. Mirza, “Political Risk

Management: A Case Study of Turkish Companies in

Central Asia and Russia,” In: H. Mirza, Ed., Global

Competitive Strategies in the New World Economy,

Edward Ergar, London, 1998, pp. 283-309.