Dimensions of European direct investment activity in Turkey: patterns and prospects

Abstract

PurposeThis paper delineates some basic trends and patterns of European foreign equity venture formations in Turkey over the 1996‐2003 period.Design/methodology/approachDrawing on a Turkish Government database, key statistics on European equity venture formations in Turkey are examined across several dimensions: trends in FDI over time, country of origin of investment, sector of investment, size of investment, geographical location and foreign equity shareholding.FindingsA structured analysis of the dataset and government statistical publications makes it possible to ascertain patterns with respect to FDI dimensions. FDI operations in Turkey are dominated mainly by European and US MNEs. The analyses also revealed that new FDI operations have changed the structural composition of overall FDI activity in Turkey. Another finding is that European equity venture formations tend to be located in the concentrated industries and also in the relatively fast growing industries. It is shown that there exist some differences among European investors when they are classified by country of origin. There are also locational differences by sector, entry date and country of origin. It appears that as European investors gain experience of the host country market, their entry mode may change over time.Research limitations/implicationsWhile the findings cast further light on the nature and pattern of European FDI activity in Turkey, it would be particularly useful in future research to investigate the core dimensions of the activity recorded in the dataset reported on here, in terms of motives for a particular mode of entry, forms of management control and performance outcomes by means of primary data collection from the parents and management of European equity ventures. The examined relationships set out in the present study are essentially univariate, so they cannot gauge which of the dimensions are likely to be more important in identifying trend and patterns of European FDI in Turkey, which constitutes a limitation of the survey.Originality/valueThese findings cast new light on the nature and pattern of European FDI activity in Turkey where there is a paucity of systematic information.