‘Locational Determinants of Foreign Direct Investment in an Emerging Market Economy: Evidence from Turkey’

Multinational Business Review 01/2002; 10(1).

ABSTRACT Over the past two decades, Turkey has recorded a substantial increase in the level of annual foreign direct investment (FDI) inflows. Building on the prior literature, this paper provides an empirical analysis of location-related determinants of FDI. This is undertaken by means of a co- integration analysis of major locational factors impacting upon the level of FDI inflows for the period 1980-1998. The evidence from this study supports the contention that while Turkey offers several location advantages to foreign investors in terms of market size, infrastructure, openness of the economy and market attractiveness, the lack of exchange rate and economic stability has hindered its efforts to harbor much higher volume of FDI.

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Available from: Ekrem Tatoglu, Sep 29, 2015
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    • "On the contrary, other researchers believed that FDI might bring a crowding effect on domestic investment, external vulnerability and dependence, destructive competition of foreign affiliates with domestic firms and a market-stealing effect as a result of poor absorptive capacity (Krstevska and Petrovska, 2012; Lipsey, 2004; Nourbakhshian et al., 2012). Nowadays, renewed research interest in FDI inflows stems from the change of perspectives among policy makers in host countries to encourage and attract more FDI that would create opportunities and help developing countries to achieve sustainable development (Cassidy and Callaghan, 2006; Erdal and Tatoglu, 2002). The various relationships between FDI inflow and its determinants have been studied comprehensively . "
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    ABSTRACT: This study aims to evaluate the long-run and short-run relationships among foreign direct investment (FDI) inflows and their determinants in Jordan for the (1978–2012) period. The bounds testing approach is used to analyze the long-run and short-run relationships among the variables. However, the Granger causality test is utilized to explore the directions of causality among the variables. The results identify that there are long-run and short-run relationships among FDI and its determinants. Moreover, the Granger causality test recommends a deferent causal relationship among FDI and their determinants. In general, the Jordanian policy makers have to be aware to the importance of inward FDI in the Jordanian economy.
    Economic Modelling 04/2015; 46:27-35. DOI:10.1016/j.econmod.2014.12.027 · 0.70 Impact Factor
    • "Throughout some Turkish empirical evidences, one may observe that budget deficit, employment and GDP (Eryiğit and Eryiğit, 2008), openness (Erdal and Tatoğlu, 2002; Karagöz, 2007; Yapraklı, 2006), openness and exchange rate (Vergil and Çeştepe, 2006), increase in exchange rate and per capita GDP (Özer and Saraç, 2008), GDP and subsidies (Özağ, 1994) are found significant in determining FDI inflows to Turkey. On the other hand, one may also list the variables having negative impacts on FDI in Turkey such as interest rate and long distance (Eryiğit and Eryiğit, 2008), labor cost (Eryiğit and Eryiğit, 2008; Kar and Tatlısöz, 2008; Sayek, 2007; Yapraklı, 2006), exchange rate (Erdal and Tatoğlu, 2002; Eryiğit and Eryiğit, 2008; Sayek, 2007; Yapraklı, 2006), exchange rate instability (Erdal and Tatoğlu, 2002), economic instability (Vergil and Çeştepe, 2006) and GDP deflator and openness (Özer and Saraç, 2008). The majority of available papers in FDI literature follows constant parameter (linear) time series and/or panel data analysis without considering regime changes or regime shifts. "
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    ABSTRACT: This paper considers movements of Foreign Direct Investments (FDI) in Turkey, and therefore, to understand the dynamics of FDI, runs several nonlinear FDI equations in which the basic determinants of FDI in Turkey are determined through Markov Regime-Switching Models (MSMs). The statistical properties of Markov Regime-Switching time series models are more desirable than those of conventional time series or panel regression models. Through these properties of MSMs, i) one can observe structural changes, if they exist, in FDI equations through time, ii) if, in fact, the true FDI regression equation follows a nonlinear relationship, MSMs fit data better than the linear models. This paper eventually follows maximum likelihood methodology of Markov Regime-Switching Model (MSM) to search for the possible structural changes in level and/or trends and possible changes in parameters of independent variables of FDI-MSM equations through the transition probabilities. In conclusion, this paper yields the outcome that Turkish FDI growth equation has significant structural changes in level and trend and that has significant coefficient shifts in explanatory variables. These explanatory variables are Turkish GDP Growth, Labor Cost, the Electricity Price Growth, the growth in average prices of High Sulphur Fuel Oil, Cooking Coal, Steam Coal and Natural Gas, Export Growth, Import Growth, Discount Rate and Country Risk Indexes for Turkey. US and EU, respectively, within the time interval from 1988 first quarter to 2010 second quarter. (c) 2012 Elsevier B.V. All rights reserved.
    Economic Modelling 01/2013; DOI:10.1016/j.econmod.2012.04.009 · 0.70 Impact Factor
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    • "Compared to other forms of international expansion such as exporting, franchising , and licensing, FDI holds three advantages: (1) ownership advantage (derived from firm-specific resources and capabilities ); (2) internalization advantage (derived from reduction in transaction costs); and (3) location advantages (derived from country-specific attributes such as markets, resources, strategic assets, and efficiency; Habib and Zurawicki 2002; Peng and Beamish 2008). In selecting a country for investment, corporations take into consideration a multitude of factors, including natural resources, types and availability of labor, proximity to markets, sociocultural and politicoeconomic climate, legal framework, infrastructure, market size, governance, competitive intensity, transportation costs, trade and investment regime, and openness (Erdal and Tatoglu 2002; Nguyen 2009; Papadopoulos and Malhotra 2007). However, there is a dearth of research that looks into the dark side of FDI, that is, the negative consequences that host countries have to face following their decision to open up the home markets to foreign investors. "
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    ABSTRACT: Vietnam has become an attractive destination for foreign investors looking to maximize economic gains due to an increasingly young and educated population, a fast growing middle class, political stability, low labor cost, and loose operational standards. The inflow of foreign direct investment (FDI) has brought many positive outcomes to Vietnam, but its dark side is beginning to emerge. This article discusses one of the negative aspects of FDI-driven economic development in Vietnam through a high-profile, ongoing scandal involving Vedan, a Taiwanese company caught in the poisoning of the Thi Vai river. The authors provide implications for policy making and future research.
    Journal of Macromarketing 03/2012; 32(1):74-86. DOI:10.1177/0276146711423666 · 1.14 Impact Factor
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