Academic journal article Management International Review

The Dynamics of Manufacturing Joint Ventures in Turkey and the Role of Industrial Groups

Academic journal article Management International Review

The Dynamics of Manufacturing Joint Ventures in Turkey and the Role of Industrial Groups

Article excerpt

Introduction

Historically, many multinationals have restricted their joint venture activities to industrialised countries. Recent research has, however, detected an increased interest in joint venturing in developing countries, particularly in those with relatively high growth rates. For example, Hladik (1985) estimates that by 1975 32% of U.S. subsidiaries formed in developing countries were joint ventures. Morris and Hergert (1987) also note that international joint ventures are now as important as wholly-owned subsidiaries for foreign direct investment (FDI) by U.S. multinational companies (MNCs) (for a similar conclusion see also Christelow (1987)). Similarly, Oman (1984) shows that in the manufacturing sectors of the ten developing countries in his sample, the most important new organisational form for investments was joint ventures. Several other researchers have also indicated that joint ventures, not wholly owned subsidiaries, predominate as entry vehicles in developing countries (Beamish 1987, 1988, Conolly 1985, Raveed and Renforth 1983, D'Souza and McDougall 1989). A number of questions arise. Why should multinationals increasingly choose joint ventures for their entry into developing countries? Why do local enterprises cooperate with foreign MNCs on their own turf? What are the long term expectations motivating local enterprises and industrial groups when setting up joint venture operations? These issues, among others, are explored in this paper.

The analysis is based on the collection of primary data at a firm level. Management executives were interviewed directly, although a limited number of mail questionnaires were also sent to MNCs headquartered in the U.S.A. and Japan. Postal responses were only used to validate answers given by executives at the affiliate level. Data provided by foreign parent headquarters through the mailed questionnaire were only used for factor analysis where this required interval scaled data. The questionnaire used for the field work in this study was designed to apply to both foreign and local (Turkish) parent firms. The distribution of the sample firms by country of origin is shown in Table 1.

Table 1. Distribution of the Sample by Country of Origin

Country          Number of firms   Percentage in the sample

Germany                 18                  38.3
United Kingdom           7                  14.9
Netherlands              2                   4.3
France                   2                   4.3
Belgium                  1                   2.1
Italy                    2                   4.3
Japan                    3                   6.4
Canada                   1                   2.1
United States           11                  23.4
Total                   47                 100.0

The Characteristics of Turkish Industrial Groups and Foreign Direct Investment in Turkey

After the foundation of the New Republic in 1923, Turkey adopted an inward looking, autarchic political economic system which was based on an etatist ideology. The role of foreign direct investment prior to 1980 was minimal and industrial organisations consisted of large State Economic Enterprises (SEE) and private enterprises. Large private enterprises, by and large controlled by industrial groups, remain active in many markets, albeit not necessarily under unified entrepreneurial and financial control. More generally, this pattern of industrial organisations has two common features. First, Turkish Industrial Groups draw their capital and upper level managers from sources which transcend a single family. This aspect of group operations differs from family-owned and controlled organisations. Nevertheless, a group's upper level managers often include some members of the family within which the group originated. Secondly, somewhat like the zaibatsu in pre-World War II Japan and some of the larger keiretsu in modern Japan (Morikawa 1992, Mirza 1993), groups invest and produce in several industries. …

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