Turkish Multinationals Abroad: The

Effect of Structures, Institutions and

Agents

Dr. Caner BAKIR

Associate Professor of International Political Economy
Co-Director of Centre for Globalisation, Peace and Democratic Governance,
Department of International Relations
Koç University
E-mail: cbakir@ku.edu.tr
Author gratefully acknowledges the support of The Scientific & Technological
Research Council of Turkey (TÜBİTAK, 110K346 and Postdoctoral Fellowship
for Research Abroad, TÜBİTAK 2219). This paper is also a part of COST Action
IS0905.
1
 Motivation and key questions

 This presentation examines internationalization of

TMNCs between 2000 and 2013.

 It offers answers to questions such as:

 How do TMNC investments spread by geography,

industry and sector?

 How do they go abroad?

 Why do they internationalize?

2
 Data sources

 This study is based on fDi Intelligence Database for

Greenfield investments (from 1 January 2003 to 30
December 2013),
 Thomson Reuters Mergers and Acquisitions Database for
brownfield investments (from 1 January 2000 to 28
February 2011, focusing top 28 investments of USD10
million and over, or 98% of the total),
 44 elite interviews and written secondary sources.

3
 OFDI between 2003-2013

No of FDI projects 796

Total jobs created 162,042

Average project size (jobs) 203

Total capital investment USD 39,019.97 m

Average project size USD 49.00 m

4
 Greenfield investment trend,
2003-2011

9000 120

8000
100
7000

6000 80

5000
60
4000

3000 40

2000
20
1000

0 0
2003 2004 2005 2006 2007 2008 2009 2010 2011

Toplam yatırım tutarı (milyon $) Yatırım sayısı

5
 Number of projects by type

New
40 Expansion
1
755 Co-location

6
 FDI trends by sector
Jobs Created Capital investment
Sector No of projects
Average
Total Average Total (USD m)
(USD m)
Textiles 134 34,335 256 3,978.60 29.70
Food & Tobacco 80 12,913 161 1,461.20 18.30
Financial Services 65 3,283 50 1,791.10 27.60
Real Estate 58 46,062 794 7,331.60 126.40
Consumer Products 47 7,298 155 1,131.50 24.10
Ceramics & Glass 46 10,561 229 2,473.70 53.80
Transportation 36 1,587 44 979.30 27.20
Hotels & Tourism 35 7,032 200 2,679.50 76.60
Communications 35 1,591 45 1,293.20 36.90
Metals 30 3,254 108 1,950.80 65.00
Other sectors 230 34,126 148 13,949.30 60.60
Total 796 162,042 203 39,020.00 49.00

7
 FDI trends by business activity
Jobs Created Capital investment
No of
Business activity projects Average
Total Average Total (USD m)
(USD m)

Manufacturing 203 67,723 333 14,505.00 71.50

Sales, Marketing & Support 180 3,330 18 1,527.90 8.50
Retail 169 23,060 136 3,221.00 19.10
Construction 86 55,952 650 9,578.00 111.40
Business Services 74 3,023 40 1,772.40 24.00
Logistics, Distribution & Transportation 25 4,609 184 1,064.40 42.60
ICT & Internet Infrastructure 16 1,264 79 1,203.40 75.20
Headquarters 15 515 34 59.80 4.00
Electricity 10 1,001 100 4,679.30 467.90

Extraction 4 412 103 1,126.80 281.70

Other business activities 14 1,153 82 281.90 20.10
Total 796 162,042 203 39,020.00 49.00

8
 Where do TMNCs go?: Greenfield
Investments

9
 FDI trends by destination country
Jobs Created Capital investment
No of
No of
Destination country companie
projects Total (USD Average
s Total Average
m) (USD m)

Germany 117 104 2,495 21 722.90 6.20

Russia 105 52 38,508 366 7,739.40 73.70
Romania 51 39 14,187 278 2,648.40 51.90
Bulgaria 45 25 14,141 314 2,526.60 56.10
Azerbaijan 34 26 6,248 183 2,174.10 63.90
UAE 22 18 1,851 84 829.10 37.70
Ukraine 21 17 4,600 219 995.10 47.40
United States 21 20 2,625 125 732.60 34.90
Iraq 19 12 666 35 549.20 28.90
Macedonia FYR 17 13 6,149 361 968.00 56.90

Other destination countries 344 313 70,572 205 19,134.60 55.60

Total 796 438 162,042 203 39,020.00 49.00

10
 FDI trends by destination city
Projects Companies Capital
Jobs Investme
Destination city
No % No % Created nt (USD
m)
Köln 26 3.27 24 5.48 933 352.70
Bucharest 23 2.89 18 4.11 10,374 1,358.90

Baku 22 2.76 16 3.65 4,600 1,119.40

Moscow 19 2.39 12 2.74 6,135 1,019.20

Dubai 17 2.14 15 3.42 1,208 543.00
St Petersburg 15 1.88 3 0.68 7,292 1,212.30
Dusseldorf 14 1.76 14 3.20 146 5.20
Duisburg 10 1.26 10 2.28 56 7.00
Paris 8 1.01 7 1.60 340 94.50
Sofiya 7 0.88 7 1.60 1,534 174.90
London 7 0.88 7 1.60 292 90.90
Skopje 6 0.75 6 1.37 3,910 631.30
Munich 6 0.75 6 1.37 170 20.70
Berlin 6 0.75 4 0.91 89 19.10
NYC (NY) 6 0.75 6 1.37 1,031 174.10
Kazan 6 0.75 2 0.46 1,574 180.00
Arbil (Erbil) 6 0.75 6 1.37 416 86.10
Ashgabat 5 0.63 4 0.91 2,446 518.50
Kyiv 5 0.63 5 1.14 2,816 391.20
Athens (Athina) 5 0.63 5 1.14 530 115.00
12,785.2
Other destination cities 325 40.83 305 69.63 59,686
0
18,120.8
Not Specified 252 31.66 175 39.95 56,464
0
39,020.
Total 796 100.00 438 100.00 162,042
00
11
 Europe attracts the highest
number of TMNCs greenfield
investments (39%)
Geographical Distribution of Greenfield
Investments
(Number of Investments)
29, 5% 46, 7%

15, 2% CIS
19, 3% EU
27, 4% West Asia
191, 31%
North Africa
59, 9% South Asia
East Asia
Southeast Europe
241, 39%
Other

12
 But the CIS countries receive the
highest value in Greenfield
investments (45%)
Geographical Distribution of Investments
(Value of Investments - Million USD)
885.6, 3% 1132.1, 3%
975.6, 3%
3003.2, 8%
CIS
EU
3286.1, 9% West Asia
16151.7, North Africa
45%
South Asia

3675.4, East Asia

10% Southeast Europe
6928, Other
19%

13
 Germany has the highest number
of Greenfield investments

Distribution of TMNCs FDI in EU Countries

(Number of Investments)

Bulgaria

41, 17%
Romania
69, 29%

Germany
43, 18%
France

11, 4%
Greece
10, 4%
67, 28%
Other
14
 But the value of investments
heavily concentrated in Bulgaria
and Romania (61%)

Distribution of TMNCs FDI in EU Countries

(Value of Investments - Million $)

Bulgaria
1611.4,
2111.9, Romania
23%
31%
Germany
274.9, 4%
France
302.2, 4%
Greece
2102.7,
525.0, 8% Other
30%

15
 What are the key
motivations for GFDI?

Most of these investments

aim access to new markets
and regions followed by
efficiency seeking
motivations

16
 What are the key FSAs and CSAs
that facilitate GFDI?

 TMNCs exploit relative ownership advantages

such as technology, managerial knowhow and
expertise when operating in CIS, Middle East,
and Emerging Europe.

 They are attracted by host CSAs such as

strong local/regional demand for goods and
services offered.

17
 Why Bulgaria and Romania?:
FSAs and CSAs are reinforced by
structural complementarities
 FSAs such as managerial knowhow and
technology coupled with CSAs such as
geographical proximity and cheap and
skilled labour contributed TMNC
investments in these countries.
 Bulgaria’s and Romania’s EU membership
has been a major structural
complementarity that opened a window
of opportunity to Turkish construction
firms to undertake EU-funded
infrastructure investments in these
countries.
 These are mainly market seeking FDI
18
 Greenfield investments are
concentrated in Real Estate (72%)
Sectoral Distribution of FDI by TMNCs between 2003-2013
(Value of Investments- Million USD)
Real Estate

Coal, Petroleum and Natural

4929, Resources
13.68% Construction and Building
1109, 3.08% Materials
1152, Hotel Management and Tourism
3.20%
Ceramics and Glass
1223,
10711, 29.72%
3.39% Textiles
1339, Financial Services
3.72%
Chemicals
1624,
4.51% Telecommunication
4647,
12.90% Paper, Print and Packaging
1677, 4.65%
Wood
1691, 4.69%
Food and Tobacco
1693, 4.70%
2015, 5.59% 2225, 6.17% Other

19
 Concentration is in construction
subsector within real estate
sector (98%)
Figure 6: Investment Activities in Real Estate Sector
(Value of Investments - Million USD)
213.23, 1.99%

1.84, 0.02%

Construction

Management

Sales, Marketing and

Assistance

10496.36,
97.99%
20
 Acquisitions trend,2000-2013
Yearly Distribution of Mergers & Acquisitions (2000-2011)
2000 1885.5 7
Total Investment Value (Million USD)

1800
6 6 6

Number of Investments
1600

1400 5

1200 4 4
1000
3 3 3
762.4
800 714.3

2
600 2 500.9 2

400 1 291.5
1 1
200 132.5 129
41.4 108
0 0 0
0 0 0 0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Investment Value Number of Investments

21
 Where do TMNCs invest about
USD4 billion in (over 10% of total
OFDI)?

22
 TMNCs’ acquisitions in number
concentrated in developed
economies (68%)
Distribution of the Number of the
Mergers and Acquisitions among
2, 7% Economic Regions

Developed Countries
7, 25%
Transition Countries
19, 68%
Developing
Countries

23
 TMNCs’ acquisitions in value also
concentrated in developed economies
(%72)
Figure 9: Distribution of the Value of the Acquisitions
among Economic Regions (Million USD)

523.3,
12%

Developed Countries
745.3, 16% Developing Countries
Transition Countries
3296.8, 72%

24
 Europe has half of these
investments in number
Geographical Distribution of the Number of the
Acquisitions

4, %14
European Union

CIS
3, %11

14, %50 North America

3, %11
Southeast Europe

4, %14 Other

25
 Europe has also the half of these
investments in value
Geographical Distribution of the
Value of the Acquisitions (Million
202.9, USD)
4% 157.7, 4% European
320.4, 7% Union
North
America
694.6, South Asia
2159.8,
15% 47%
CIS

1030, 23%

26
 Distribution by country: Netherlands,
US and Romania are the top 3 in
number

Hollanda
5, %18
ABD
9, %32 Romanya

3, %11 Kazakistan
Almanya
Arnavutluk

3, %11 Fransa
2, %7 Diğer
2, %7 2, %7 2, %7

27
 Netherlands, US, and Iran are
the top 3 in value

100.4, %2
148.9, %3 350.2,
%8
171.1, %4

Hollanda ABD
180, %4
1137.9, %25
İran Fransa
239.8, %5

Avusturya Azerbaycan
512.6, %11
1030, %23
Arnavutluk Almanya

Kazakistan Diğer
694.6,
%15

28
 Sectoral distribution of the top 28
acquisitions in number
Sectoral Distribution of the Number
of Mergers and Acquisitions
4, %14 Intermediate
Goods
2, %7 Banking and
7, %25 Finance
Household
3, %11 Electronics
Telecommunicatio
4, 5, %18 n
3, %11 %14 Food and
Beverages

29
 Sectoral distribution of the top 28
acquisitions in value
Sectoral Distribution of the Value of
Mergers and Acquisitions (Million USD)
Food and
892.4, %20 Beverages
1173.8, %26 Banking and
Finance
Telecommunication

795, Transportation
149.6, %3
%17
Intermediate Goods
420.9, %9
Household
552.8, %12 581, %13 Electronics

30
Logistics and transportation, banking, and
telecommunications are top sectors in
Europe
Sectoral distribution of the value of M&As in
Europe
(Million Banking
USD) and finance
110.2, 4.48%
149.6, 6.09%
Logistics and
190.2, 7.74% transportations
685, Telecommunications
27.87%
Media and
369, advertisement
15.01% Intermediate goods
552.8,
22.49% Household electronics
and consumer durables
401, 16.32% Other

31
 What does the fact that around
72% of TMNCs’ Brownfield FDI in
developed markets mean?

Resource seeking and learning:

TMNCs acquire firms in developed
markets due mainly to gain FSAs such
as access to new brands, further
management skills, technical know-
how, innovation and networks as well
as for value chain configuration.
32
 Horizontal acquisition examples
 Burgbad in 2006 and Villeroy&Boch by
Eczacıbasi Group in 2007

 Fincuoghi by Kale Group in 2011

 The acquisition of Godiva Chocolatier by Yıldız

Holding in 2007/ united Biscuits, USD3.5b,
2014

33
 Structural complementarities create
conducive environment for such
investments: Godiva Chocolatier was
acquired by Yıldız Holding
 In the words of Yildiz Holding’s CEO Atilla Kurama:
 Our biggest competitors were the financial investors and
world’s giants in chocolate sector which acquire valuable
brands when they see it. …In those days [before the
auction day], the deal price was expected to be around
1.2-1.5 billion USD. There were two things that change
the fate of this [acquisition] agreement. First, financial
investors withdrew from the scene due to the credit
crisis originating in the US financial markets. This was
our biggest conjectural chance. [Second], depreciation
of the US dollar against Turkish lira has offered an
advantage to us. (Anka, 28 December 2007, emphasis
added)
 Other examples of structural complementarities include
Euro crisis, EU enlargement, privatization processes
34
 What were the motives for
Acquisitions? Godiva example
Strategic motives to create synergy, to
access new markets, to consolidate position
in existing markets.
Has strategic motives been achieved?
Following the acquisition in 2008; Godiva
entered 11 new countries including Saudi
Arabia and South Korea; increased number
of its stores from 480 to over 600; sales
points from 10,000 to over 32, 000; total
sales from 450 million to 750 million.
35
 How was this performance
possible?

 Yildiz Holding’s and Godiva’s FSAs blended well in post-

acquisition consolidation:
 Yildiz Holding’s FSA’s such as strength in understanding
emerging market customers and at operating in
countries with poorly developed institutional
environments resolved Godiva’s liability of newness,
liability of foreignness and liability of expansion.
 Godiva’s FSAs such as brand, technology and managerial
knowhow and experience in global chocolate business
were missing Agency-level complementarities in Yildiz’s
successful global expansion.

36
 Example 2: economic crisis and
recession, privatization

 Crisis: Yildirim Group has bailed out

heavily indebted shipping giant CMA CGM
by acquiring 20 percent of the French firm
for 500 million dollars (380 million euros)
in 2010. (Vertical Acquisition)

 First privatization in Iran: Gübretaş (the

largest chemical fertilizer in the region)
acquired Razi Petrochemical Co
(USD694million) in Iran in 2008 (vertical
acquisition)
37
 Why do some of the TMNCs acquire
firms in developing countries?

Market and resource seeking FDI:

To access CSAs such as new
markets, lower costs, whilst
exploiting their ownership
advantages such as technology,
knowledge and managerial
experience.

38
 Conclusion
 TMNCs have competitive FSAs that they exploit in
foreign markets (especially in developing/transition
economies); they do not rely CSAs only that include
access to local customers, land, raw materials, cheap
and skilled labor;
 TMNCs internationalize to gain FSAs via acquisition of
intangible assets such as brand and technology in
developed markets and value chain reconfiguration;
 There are very few TMNCs whose FSA is based on
(product) innovation such as the Eczacıbaşı Yapi
(bathroom products and ceramic tiles producer
contending for top three ranking in Europe) and Kordsa
Global (a world leader in nylon and polyester yarn, cord
fabric and single end cord production)

39
 Thank you!
40