Outward Foreign Direct Investment in Emerging Economies: A Case of Turkey

Outward Foreign Direct Investment in Emerging Economies: A Case of Turkey

Ahmet Oğuz Demir (Istanbul Commerce University, Turkey) and Muhammad Moiz (Istanbul Commerce University, Turkey)
DOI: 10.4018/978-1-5225-2345-1.ch012
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Abstract

Outward Foreign Direct Investment (OFDI) has been utilized by developed economies to enter developing markets for competitive advantages. However, recent boom in OFDI from emerging economies has prompted the question as to why these economies are investing abroad? A modest amount of literature exists regarding China and India, however, Turkey being an emerging economy has been largely untapped when it comes to determinants of OFDI. This study uses the Global Competitiveness Index (GCI) to find host and home country factors which have led to OFDI from Turkey to their top 10 investment destinations for the past 10 years. The host country factors found to be significantly correlated with Turkish OFDI are innovation (Netherlands and Russia), technological readiness (Russia and UK), labor market efficiency (Netherlands), infrastructure (Netherlands), domestic market size (Germany), and exports (UK). The home factors found to be significantly correlated with Turkish OFDI are infrastructure and domestic competition.
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Turkey’S Current Outward Foreign Direct Investment Overview

Turkey’s OFDI flows have been increasing over the years improving the OFDI stock to over $40 billion. Turkish firms are looking to go abroad and have recently had major mergers and acquisitions. OFDI not only helps these Turkish firms reach new markets, resources, and technology but also provides employment to thousands of people in host countries. Several surveys completed over the years show the number of foreign workers which are employed by Turkish MNEs; in 2007 the top 12 Turkish MNEs employed over 72, 000 workers abroad (KHU-DEIK-VCC, 2009), in 2009 the top 19 Turkish MNEs employed over 90, 000 workers abroad (KHU-DEIK-KPMG-T-VCC, 2012), and in 2012 the top 29 Turkish MNEs employed over 115, 000 workers aboard (KHU-DEIK-VCC, 2014). Turkish MNEs continue to invest abroad and increase their foreign affiliates and assets. Turkish OFDI Stock had crossed the $40 billion mark in the year 2014 over double its size in 2008 (estimated $17.85 billion). UNCTAD (2015) data on Turkish OFDI shows that Turkish investors have substantially increased their investments abroad after the 2008 global financial crisis.

Table 1.
Turkey’s outward foreign direct investment (1990-2014)

Source: UNCTAD (2015).

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