Why Do the Turkish Firms Invest in Mainland Europe?

Abstract

Outward foreign direct investments (FDI) by Turkish firms in the new millennium show intriguing geographic distribution pattern and unlike the predictions of classical theories of FDI. In this study we contribute by linking the observed pattern of outward FDI with Turkish firms’ motivation for investment across national borders. We enrich research by collecting and analyzing FDI motivation data at the firm-level for a very important but less researched developing country: Turkey. Content analysis of text material on the foreign investments made by 211 Turkish firms reveals that Turkish firms primarily perform FDI in European developed countries for reasons other than conventional, namely, market- and strategic-asset-seeking motivations. More importantly, Turkish firms seem to be using the European countries to (1) present themselves as a European Union company, (2) make use of special features of these countries to expand their businesses within and to other countries and, (3) make use of the favorable tax treatment policies available to foreign investors. Surprisingly, our analysis shows that in spite of its small size, the Netherlands is a preferred destination for Turkish FDI over other Western European countries due to its strategic location and favorable investment policies.

Citation

Gubbi, S.R. and Sular, S.A. (2015), "Why Do the Turkish Firms Invest in Mainland Europe?", Emerging Economies and Multinational Enterprises (Advances in International Management, Vol. 28), Emerald Group Publishing Limited, Leeds, pp. 441-470. https://doi.org/10.1108/S1571-502720150000028019