Why Do Turkish Firms Go Abroad to Invest?

Working Paper
Yılmaz Kılıçaslan, Yeşim Üçdoğruk Gürel, Gökhan Önder, Zeynep Karal Önder
EconWorld Working Papers Series No: 2019001

 

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.

Keywords: Outward Foreign Direct Investment, outward FDI, Probit, Logit, Turkey

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