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Exploring New Research Areas on Turkish MNCs in 2012-2013

This paper by Nukhet VARDAR discusses potential new research directions concerning Turkish multinational corporations in 2012-2013, presented at the final conference of COST Action IS0905. The author provides valuable insights into emerging trends and impacts on global markets.

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Exploring New Research Areas on Turkish MNCs in 2012-2013

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  1. Turkish MNCs in 2012 and 2013 -Some Possible New Research Areas

    Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted for the finalconference of COST Action IS0905, “The Emergence of Southern Multinationals and their Impact on Europe”, University of Iceland, Reykjavik, Iceland, May 19-20, 2014
  2. Global FDI Inflows (Average 2005-2007, 2007-2013;billions of USD) 11%
  3. FDI InflowTrendsGlobally Forthefirst time developingcountriestookthelead in FDI, accountingfor 54%* of the total inflows in 2012 Developedcountriessharedroppedto39%* in 2012 andexpectedtocontinue at thatlevel in 2013 2013 estimatesforFDI inflows wentby 11%, to an estimated US$1.46 trillion– a level comparable to the pre-crisis average. Inflowstothe US continuedtodecline, whileinto EU increased FDI flowstodevelopingeconomiesreached $759 billionin 2013, withincreasesto Latin America, Caribbean, Africa. DevelopingAsiais stillthelargesthostregion in theworld. * UNCTAD, Global InvestmentTrendsMonitor, No: 15, January2014
  4. Turkey’s Role in the West AsiaRegion – in RegardtoFDI Turkeyemerged as a significantinvestor in the West Asiagroup - OFDI growingby 73% in 2012 to $4.1 billion. Turkey’srankingclimbedfrom 43rd in 2012 to 36th in 2013 Accordingto 64 IPAsviews, Turkey is considered as themajordevelopingcountrysource of FDI (mostpromisinginvestoreconomies in 2013-2015 list)
  5. TNCs’ Top ProspectiveHostEconomiesfor 2013–2015 (Percentage of respondents selecting economy as a top destination) Source: UNCTAD WorldInvestmentReport 2013,p. 50 Base on 159 companyresponses. 2012 rankingsaregiven in parenthesis.
  6. Turkey’s Role in the West AsiaRegion – InRegardto IFDI Turkeywaslessfortunate in regardtoFDI’sinflowgrowth rate in 2012 AlthoughAsiaaccountedfor 58% of FDI todevelopingcountries, inflowstodevelopingAsiafellby 6.7% Inflowsto West Asiadeclinedforthe 4th consecutiveyear But with $12 billioninflows in 2012, Turkeybecamethe top country (24th amongcountriesthatattractedthemost FDI, 14th amongemergingeconomies)
  7. TheDevelopment of OFDI in Turkey Neo liberal economicpractices of 1980s Privatizationwave in 1990s CustomsUnion in 1996 Attractingforeigninvestors, possiblelicensingand JV agreements As a resultTurkishMNCsdevelopedlowercostalternatives, not tolosetheircompetitiveedge in thedomestic market Whendomestic market shrunk, newbusinessmodelstransferredtointernationalmarkets
  8. Development of Inward and Outward FDI in Turkey (2005- 2012; in million USD) Source: UNCTAD WorldInvestmentReport 2012 and 2013
  9. Turkish MNCs Mode of Investment in OFDI (in percentage) TurkishTreasury’sresearchbased on TurkishMNCs, representing 95% of Turkey’s total OFDI Source: YurtdışıDoğrudanYatırımRaporu 2012, HazineMüşteşarlığı, Mali SektörleİlişkilerveKambiyoGenelMüdürlüğü, Ekim 2013 (Turkish OFDI Report prepared by the Turkish Treasury in October 2013)
  10. Turkish MNCs Reasons for Going Abroad(in percentage) Source: YurtdışıDoğrudanYatırımRaporu 2012, HazineMüşteşarlığı, Mali SektörleİlişkilerveKambiyoGenelMüdürlüğü, Ekim 2013 (Turkish OFDI Report prepared by the Turkish Treasury in October 2013)
  11. TurkishMNCs’ InvestmentDecisionDrivers* Since 2011 report, no. of TurkishMNCswith OFDI $100 mioandaboverosefrom 19 to 29 Source: Vale Columbia Center on Sustainable International Investment (VCC), Kadir Has University and the Foreign Economic Relations Board (DEIK), The Emerging Market Global Players (EMGP) Project, December 3, 2009; January 31, 2011andMarch 24 2014reports
  12. SomeFurtherObservationsMade on the Vale Report IncreasingtendencybyTurkishMNCstowardsmining, energy, infrastructure Thoughnot mentioned in thereport, an increase in - MENA & SubSaharan 2 % (2009), 17% (2011) and 12% (2013) NA,LA, Caribbean 2 % (2009), 6% (2011) and 4% (2013) TurkishTreasury data alsosupportsthis
  13. TheNeedtoLookBeyondOfficalFigures Thereality of undiscloseddealsanddealamounts Thisfactcouldhavemuchmoreimpactforsomecountries Sometimestheofficialfigurescould be onehalf, orevenonethird of theestimates ThereforeTurkey’spotential in OFDI and IFDI could be underestimatedifonlyofficialfiguresareconsidered
  14. Turkey’s M&A PurchasesAccordingtoTwoDifferentSources(in million of USD) Source: UNCTAD WorldInvestmentReport 2012 and 2013; Turkish Outbound M&A Review 2012-2013, Deloitte, February 2014 Deloittefiguresinclude estimates, whereas UNCTAD reportsonlytheofficialfigures.
  15. SomeRecentTrendsHighlightedbyDeloitte Theaveragedealamount is nearlyhalvedcomparedtopreviousyears ($61 mio) This is duetocrisisandlowervaluation of companies. Also an indicationthat OFDI is movingtowardsmediumsizedTurkishMNCs Forthefirst time TurkishMNCsmade OFDI in Brazil, MexicoandThailand S. AfricanDefyboughtfor $324 miobyArçelik in 2011
  16. Turkish OFDI StudiesbyAcademia Although not exclusive, theliterature mainly looks into firm specific capabilities and Turkish companies’ reasons for OFDI, such as Erdal & Tatoglu, 2002; Erdilek, 2003, 2005, 2008; Kaya &Erden, 2008; Demirbag & Tatoglu; 2008, Kok & Ersoy, 2009; Kayam & Hisarcıklılar; 2009; Eren-Erdoğmuş, et al. 2010 Orchoice between acquisition and Greenfield entries are studied by Demirbag et al., 2008 Equity-based entry modes by Demirbag et al; 2009 Performance of foreign equity ventures by Kaya & Erden, 2007 Anıt et al. (2011) compare inward and outward FDI determinants in Turkey These valuable studies tell us a lot about the Turkish MNCs’ past FDI patterns and lay the necessary foundations to build upon However early indicators mentioned in business reports should be seriously considered by the academiaandintegratedintotheresearch
  17. SomePossible New ResearchAreasforTurkish OFDI Studies If OFDI is getting more widespread among medium sized Turkish firms, how would they differ in their entry strategies compared to larger Turkish MNCs? If new sectors have emerged in Turkish MNCs OFDI such as energy, manufacturing and real estate compared to the more traditional sectors such as food and beverages, how would this will have an impact on Turkish OFDI? Although EU and CIS are still important destinations for Turkish MNCs, Latin America and Africa are getting popular. How would different destinations affect their entry modes, entry strategies? In addition private equity companies have started playing important roles especially in inward FDI but their roles are not studied in regard to IB. (For instance Yardımcıoğlu & Demirel (2008) look into its effect in relation to entrepreneurship).
  18. SomePossible New ResearchAreasforEMNCsbased on Accenture Increase in global middle class - Currently 27 other economies-including Poland, Colombia and Turkey -have a greater number of households with an annual income above $30,000. In richer income segment, Turkish households with an annual income of more than $50,000 will see a total increase of $380 billion household income by 2020, the highest of any emerging economy.
  19. SomePossible New ResearchAreasforEMNCsbased on Accenture 2) Low-cost business models - Emerging middle classes mean that more and more people want to enjoy better life styles at affordable prices. ‘Better product/service quality for masses at affordable prices’ will continue to be crucial for emerging countries, as technology becomes more widespread. The low-cost business models are especially important in understanding Turkish MNCs OFDI successes.
  20. SomePossible New ResearchAreasforEMNCsbased on Accenture 3) The southern-surge in financial services - High growth rates and emerging middle class will also increase the demand for mobile banking, micro-finance and insurance. 4) Infrastructure - both a potential growth area as well as a restraining factor in emerging countries, due to the lack of infrastructure. 5) Thegrowing importance of citizen services such as healthcare, education, housing, transport will continue to get recognition. 6) Since there will be more need for qualified personnel, transfer of knowledge and transfer of education will have a higher priority, possibly leading to distance learning or satellite campuses.
  21. SuggestionsforFutureResearch UNCTAD forecasts FDI flows to$1.6 trillion in 2014 and$1.8 trillion in 2015 Emerging countries will continue to be major interest Move outside of the conventionally defined research variables, amalgamating business report findings, with that of the academic look This chain of thought could also be applied to other EMNCs. EMNCs move very fast, adapting to changing market conditions almost instantaneously. The academic work published should also gear to this speed.

  22. Turkish MNCs in 2012 and 2013 -Some Possible New Research Areas

    Nukhet VARDAR El Izi Communications Consultancy Ltd, Istanbul, Turkey. Paper submitted for the finalconference of COST Action IS0905, “The Emergence of Southern Multinationals and their Impact on Europe”, University of Iceland, Reykjavik, Iceland, May 19-20, 2014
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