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114 Özlem Özkanli (Turkey), Erkan Erdil (Turkey), Erdal Akdeve (Turkey) Innovation and relationships in industrial districts: the case of Turkey Abstract Industrial districts (ID) and small scale industrial estates are important regional development tools that have been ex-tensively utilized by the Turkish authorities as part of Turkish industrialization programs, with varying degrees of suc-cess. The empirical part of the study is carried out in one of the oldest industrial zones in Turkey, Ankara (Sincan) with 207 firms facilitating. Following the determination of innovative capacity of the firms, the study investigates the intra-and inter-ID firm relationships, and their possible implications for firm level innovation activity. At the first stage of this study, the purpose is to explore vertical I/O (input-output) inter-firm links. Following the relationship mapping, a background structure is obtained for supply chains and the relative focal firm positions are observed. The analysis of cross-tabulations provides valuable insights on the relationship between innovative capacity of firms and their interac-tions with the environment. According to a latest formal report, four firms from the district are placed among the 500 largest ones in Turkey. The results of the questionnaire which is applied to all firms in the district studied will further give evidence for developing Turkish ID innovation policies.
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Innovative Marketing, Volume 4, Issue 1, 2008
114
Özlem Özkanli (Turkey), Erkan Erdil (Turkey), Erdal Akdeve (Turkey)
Innovation and relationships in industrial districts: the case of Turkey
Abstract
Industrial districts (ID) and small scale industrial estates are important regional development tools that have been ex-
tensively utilized by the Turkish authorities as part of Turkish industrialization programs, with varying degrees of suc-
cess. The empirical part of the study is carried out in one of the oldest industrial zones in Turkey, Ankara (Sincan) with
207 firms facilitating. Following the determination of innovative capacity of the firms, the study investigates the intra-
and inter-ID firm relationships, and their possible implications for firm level innovation activity. At the first stage of
this study, the purpose is to explore vertical I/O (input-output) inter-firm links. Following the relationship mapping, a
background structure is obtained for supply chains and the relative focal firm positions are observed. The analysis of
cross-tabulations provides valuable insights on the relationship between innovative capacity of firms and their interac-
tions with the environment. According to a latest formal report, four firms from the district are placed among the 500
largest ones in Turkey. The results of the questionnaire which is applied to all firms in the district studied will further
give evidence for developing Turkish ID innovation policies.
Keywords: inter-firm relations, innovation, industrial district, Turkey.
Introduction 39
The intra- and inter-ID firm relationships and their
possible implications for firm level innovation activ-
ity have been widely examined in literature. How-
ever, existing literature has methodological and
empirical difficulties. The methodological difficulty
is that some of the studies concentrate on existing
clusters by employing standard technical tools with-
out rigorous attempt to analyze social aspects of the
inter-firm relations. Besides, the empirical difficulty
consists in the geography of applications. Although
the studies on developing countries are actually
limited in number, most of the studies used data
from the developed countries. The present study
contributes to this inadequate literature on develop-
ing countries concentrating on Turkish industrial
districts case.
The ultimate aim of this study is to present evidence
on inter-firm relations in a Turkish industrial district
towards a second step of detailed clustering analy-
sis. This study is the first step to explore possible
opportunities to analyze Turkish clusters with their
own peculiarities. According to Lundvall (1985),
repeated interactions can eventually give rise to
significant learning and innovation. In this context,
relationships are considered as coordinating devices
for resource creation and knowledge diffusion
which are very important for innovation. New com-
binations of sources of knowledge and skill are de-
veloped; an environment for the exploitation of com-
plementarities is created; potential innovations are
explored and realized during this process.
In this study, the purpose is to explore vertical I/O
(input-output) inter-firm links. Following the relation-
ship mapping, a background structure is obtained for
supply chains and the relative focal firm positions are
© Özlem Özkanli, Erkan Erdil, Erdal Akdeve, 2008.
observed. For this end, a survey is applied to all 207
firms facilitating at industrial zone in Ankara (Sincan).
The next section reviews the available evidence on
inter-firm relations. Section 3 sums up research meth-
odology and main characteristics of the firms in the
sample. The analysis of cross-tabulations in Section 4
provides valuable insights on the relationship between
innovative capacity of firms and their interactions with
the environment. The results of the study will further
give evidence for developing Turkish ID innovation
policies.
1. Inter-firm relations in retrospect
The literature review part of the study focuses on the
firm innovation and relationships and the studies of
inter-firm relationships in Turkey.
The network structures between markets and hierar-
chies are investigated in the literature (Thorelli, 1986;
Easton and Araujo, 1994; Ford and McDowell, 1999;
Hillebrand and Biemans, 2003). The relations linked to
other relations resulting in a system of interdependent
relations mechanism are explained in the study of
Anderson et al. (1994). Wilkinson and Young (2002)
mention exchange relations as well as other types of
relations with actual and potential suppliers, other
firms and organizations such as governmental instru-
mentalities and competitors. Firms that have a formal
business plan or formal networks with other firms or
R&D expenditure are also more likely to report an
innovation (Harris, Rogers and Siouclis, 2003).
It is hypothesized by Ritter and Gemünden (2003) that
a firm’s degree of network competence has a positive
impact on its degree of technological interweavement;
a firm’s degree of network competence has a positive
impact on its innovation success; a firm’s degree of
technological interweavement has a positive impact on
its product and process innovation success; and a com-
pany’s degree of network competence is positively
Innovative Marketing, Volume 4, Issue 1, 2008
115
influenced by the degree of access to resources, the
extent of network orientation taken by a company’s
human resource management, the integration of a
company’s communication structure, and the openness
of its corporate culture. Figure 1 shows the antecedents
and impacts of network competence.
Access to resources
Network orientation of
Human Resource
Management
Integration of
communication
structure
Openness of corporate
culture
Degree of network
competence
Degree of technological
interweavement
Degree of innovation
success
Source: Ritter and Gemünden, ( 2003).
Fig. 1. Antecedents and impacts of network competence
According to a study of Day (1994), Johnson and
Sohi (2003) examined the impacts of inter-firm
relationships on learning. Figure 2 shows their
model of learning activities in buyer-seller rela-
tionships.
In a local production system, exchange and crea-
tion of knowledge take place at both vertical di-
mension (Hakansson, 1987; Hakansson and Jo-
hanson, 2001)1. On the other hand, according to
some researches (Lorenzoni and Lipparini, 1999;
Maskell and Lorenzen, 2004) as the firms estab-
lish horizontal links, they are able to monitor,
compare, select and imitate competitors’ activi-
ties; engage in learning and continuous improve-
ment by observing, discussing and comparing
dissimilar solutions; share opportunities and
threats; effectively share a communal social struc-
ture.
Platform variables
Learning intent
Transparency
Receptivity
Learning activities
Dissemination of information
Shared interpretation of
information
Relationship outcomes
Effectiveness/efficiency
Commitment
Source: Johnson and Sohi, (2003).
Fig. 2. Learning activities in buyer-seller relationships
One of the most comprehensive studies on Turkish
clusters is carried out by Öz (2004). In this study,
four different clusters of furniture, textile, carpet,
and leather clothing are examined. Armatlı-Köroğlu
(2004) and Eraydın and Armatlı-Köroğlu (2005)
investigated three clusters having different innova-
tive capacities in Turkey. These studies find out
differences in regional and external networks caused
by the differences in production organization and
historical differences. Oba and Semerciöz (2005)
noted the antecedents of trust in a Turkish industrial
district and concluded that informal institutional
arrangements are more significant than formal ones
and reputation and expertise of other firms are more
influential than family-friendship relations as ante-
cedents of trust.
2. Research methodology and firm characteristics
The study is a combination of theoretical and em-
pirical work. The research methodology used for the
study is questionnaire survey. The research popula-
tion is the firms in Ankara 1 Industrial District in
Sincan.
Ankara 1 Industrial District which started for estab-
lishing at 1978 has been in operation since 1990.
The district covers a total area of 400 hectares. An-
kara 1 Industrial District is one of the most impor-
tant SME industry complexes in Turkey with an
employment capacity of 25,000 and 189 places of
manufacturing from several sectors. Machinery and
equipment industry, iron industry, vehicle instru-
ment industry, textile industry, petrochemical indus-
try, electric-electronics industry, construction indus-
try, mining industry, plastic industry, aluminum
industry are the main manufacturing sectors where
207 firms have facilitate.
The questionnaire is applied to all of the 207 firms
operating in 18 different sectors in Ankara 1 Indus-
trial District. For that reason, the response rate is
100%. The majority of the firms belong to metal
industry (38.16%), machinery and equipment
(13.53%). The average firm size is around 33 (Table
1). However, 47% of the firms can be treated as
small-sized establishments employing 1-24 workers,
and 47% of the firms are medium-sized establish-
ments employing 25-150 workers2.406% of the firms
do not respond to the size question. The number of
employees is considered as determinant of the firms
size in that case application.
1 For a more recent detailed review of those concepts, see Basant,
(2002).
2 The equality of the number of small and medium-sized firms occurs
just by chance, it is not a result of a purposeful sample selection criteria.
Innovative Marketing, Volume 4, Issue 1, 2008
116
The questionnaire is composed of eight parts, namely
the information about the manager of the firm, the
general information about the firm, systems and proc-
esses, the services obtained outside the firm, the per-
formance of the firm, the future needs of the firm,
clustering activities, the memberships to professional
organizations. Thus, the questionnaire provides de-
tailed information on the surveyed firms. In terms of
the employee profile of the workers, it is found that
16.46% of the employees are university (12.63%) and
higher vocational school (3.83%) graduates. On the
other hand, 36.97% of the employees are graduated
from the high school (22.72%) and vocational high
school (14.25%). Overall, only 22.79% of the employ-
ees are endowed with some sort of a vocational educa-
tion. Firms are also asked whether they engage in
R&D activities. 53.14% of the firms in our sample
claim that they engage in R&D activities. The ICT
infrastructure of the firms is not as strong as expected.
78.74% of the firms have access to the internet while
58.94% have their own web pages. As a tool of in-
creasing information flows inside the firm, 54.11% of
the firms utilize an intra-firm network. The weakest
point is observed for the B2B trade activities; only
17.39% of the firms in the sample are exploiting the
advantages of B2B portals. Table 1 summarizes the
main characteristics of the firms in the survey. As
noted before, the average firm size is 33.29. Thus, the
sample average indicates the dominance of the small-
sized establishments. The average firm age is just
above the age of the industrial district. The oldest firms
are established in 1976 meaning that even for the old-
est firms we are analyzing the development path for a
thirty-year time span. Approximately one half of the
firms in the district are exporters. The firms not export-
ing are reported that they have difficulties in access to
global markets and in finding necessary resources
(capital, technology, material, etc.).
Another important reason is the size of the domestic
market. The domestic market is large enough for the
sustainability of the firms. Considering that around
50% of the firms are exporters, some firms in our
sample are not producing and exporting according to
the global standards. 33.82% of the firms are produc-
ing in accordance with national standards. Almost
70% of the firms are planning new investments in the
near future. The dominant investment motive is related
with the production while about 15% of the firms are
planning new R&D investments. More than one quar-
ter of the establishments carry out test procedures by
using their own laboratories whereas more than half of
the firms apply to external laboratories. These figures
show that around 20% of the firms do not use any test
procedure during and after the production.
Table 1. Main characteristics of the firms in Ankara 1
Industrial District
Firm characteristics
Average firm size ( number of employees) 33.29
Average firm age 15.63
Exporter firms 50.24%
International standards certificates 38.65%
National standards certificates 33.82%
Trade mark ownership 43.96%
Planned investment 69.57%
Planned R&D investment 14.49%
Own laboratory 27.54%
Use of external laboratory 52.66%
In sum, the firms in a developing industrial district
suffer from many structural problems. The signifi-
cance of these problems is that they call for urgent
mitigation measures. The structural character of the
problems such as the improvements in financial and
labor markets necessitates consistent long-term poli-
cies. The previous experience of our research team
together with the findings of our earlier study (Durgut
and Erdil, 2005) verifies that these problems are not
only relevant at the regional level but also at the na-
tional one.
3. Inter-firm relations in Ankara industrial district
In this section, what we aim is to unearth the inter-firm
relations in Ankara industrial district. To this end,
particular variables141are cross tabulated with clustering
questions. We have basically six questions for cluster-
ing. We explore whether firms establish relations with
other firms in the same industrial district, in the same
province, in another province or abroad on certain
grounds, namely machinery and equipment purchased,
spare parts purchased, maintenance and repair service
purchased, raw materials and intermediate goods pur-
chased, products sold, and rival firms.
In fact, the firms are asked to list the geography of five
different firms to which they have the listed relation.
However, the review of the data demonstrates that
only the responses for the first two firms produce
noteworthy results2.42The table in the appendix part
illustrates the results of cross tabulations. In terms of
the export status of the firm, significant differences are
observed for obtaining machinery and equipment for
our sample. As expected, the export firms generally
purchase machinery and equipment from abroad
1 These are the export status of the firm, trade mark ownership, use of
own laboratory, use of external laboratory, attempts for product innova-
tion and/or improvement, and need for product innovation and/or im-
provement.
2 We summarized the results of the first firm in the manuscript. The
detailed table in the appendix part illustrates the results of cross tabula-
tions. The results of the answers for the second firm do not significantly
diverge from the general conclusions.
Innovative Marketing, Volume 4, Issue 1, 2008
117
(35%) possibly because of attaining international stan-
dards in production.
On the other hand, non-exporters overwhelmingly
obtain machinery and equipment from the firms in
another province (41%). Because of the nature of
the spare parts, maintenance and repair services
and the need for on-time service, these services
are acquired from the same province. This behav-
ior is not differentiated in terms of the export
status of the firm. Export firms relatively pur-
chase raw materials and intermediate goods from
abroad (13.9%) as compared to non-exporters
(7.6%). Non-exporters generally acquire them from
the same province (44.3%), while exporters – from
the different province (36.6%). The export firms
have also strong national and local market connec-
tions, 47% of the customers of those firms are in the
same province as 29% of the customers are in the
different province. The non-exporters also have
weaker customer ties in the national market; they
generally serve for the local market (45.8%). For
non-exporters, most of the rival firms are estab-
lished in the same industrial district (38.1%) and the
same province (36.9%). The rival firms of the ex-
porters are, in general, located in the same province
(30%) and in the different province. The 16% of the
exporters note that they have significant rival firms
in the global markets. The main reason behind this
low ratio is possibly due to insufficient information
on international markets.
As the next point of the analysis, we concentrate on
the registered trade mark. It is interesting to note
that approximately one third of the firms having
trade mark purchase machinery and equipment from
abroad. The share of the same and different prov-
inces is more or less same. The firms without trade
mark generally obtain them from the same province
(39.1%). For all categories of firms, the spare parts,
maintenance and repair parts are commonly pur-
chased from the same province. This fact is also
valid for the raw material and intermediate goods
purchases. The firms with trade mark are more in-
clined to obtain them from the world markets. Both
the owners and non-owners of a trade mark sell their
final goods mostly in the same province (44.3% and
53.5% respectively) even though trade mark-owners
have more access to national markets (36.4%). An-
other interesting point is the fact that there are no
significant differences between owners and non-
owners in world markets. Thus, it is possible to con-
clude that trade mark-owners do not become glob-
ally known suppliers. The rivals of non-trade mark
owners are located in the same district (43.7%),
whereas the owner’s rivals are generally in the dif-
ferent province (40.9%).
The firms having own laboratory purchase machin-
ery and equipment more often from abroad (40%)
due to the fact that R&D-based firms may transfer
know-how from abroad as compared to others.
Again the firms with own laboratory tend to obtain
raw materials and intermediate goods from abroad
as compared to non-owners of laboratory. The firms
carrying out test and quality procedures inside the
firm have more access to national markets (42.6%),
while the local market is dominant for the others
(53.4%). Such a differentiation is also observed for
the case of the rival firms. The non-owners of a
laboratory have more rivals inside the same indus-
trial district (36.6%) as the owners have more rivals
in different provinces (40%). In percentage terms,
the ratio of rivals in international markets for own-
ers (14.5%) is double of the non-owners (7.6%).
External laboratory use for the case of machinery and
equipment purchased is concentrated in the same prov-
ince (36.2%) followed by other provinces (30.5%).
The dominance of the same province is also observed
for the case of spare parts purchased (50%), repair and
maintenance services purchase (56.7%). Moreover,
these firms more often obtain the raw materials and
intermediate products again from the same province
(37.1%). The consistency of the superiority of the
same province is also observed for customers; the
firms using external laboratories have more access to
the local markets as compared to others (44.9%). The
highest rate is reached for the same industrial district
(36.6%). Finally, it is important to note that firms hav-
ing own laboratory are more articulated to the national
and international markets as compared to the firms
using external laboratories.
The firms attempting product innovation and im-
provement develop more close relationships with the
firms in the same province for all types of relationships
we reviewed. However, more than one quarter of such
firms purchase their machinery and equipment from
abroad. The undeniable dominance of the same prov-
ince alternative (34.8%) is also threatened for the case
of rival firms by different provinces choice (33.3%).
Thus, it is possible to claim that firms engaged with
innovation activities have more access to national and
international markets than the others. Finally, the same
pattern is also observed for the answers on the needs
for product innovation.
Concluding remarks and directions for future re-
search
The results presented in this study are the early out-
comes of a continuing study. However, even this early
stage produces significant results on the attitudes of
Turkish firms. It is argued that inter-firm relations and
collaboration among firms is one of the determinants
Innovative Marketing, Volume 4, Issue 1, 2008
118
of innovative capacity. Our review of Ankara 1 Indus-
trial District demonstrates the existence of some struc-
tural problems. Although more than half of the firms
are somewhat integrated to the global markets through
their exports, around one third of them do not have
either a national or international standard’s certificates.
Moreover, the existence of financial problems and
macro economic instability impede them to invest in
R&D activities which in turn have critical repercus-
sions on their innovative activities. The mismatch
between the technology and the skilled labor seems to
be another serious problem. The firms in the district
have established close vertical I/O relationships with
the local and national firms yet the links with the same
industrial district seem to be the weakest meaning that
firms are not able to fully exploit the advantages of
agglomeration, in other words, complementary rela-
tions such as providing repair and maintenance ser-
vices do not exist. The relationships are generally es-
tablished at the national level except for the cases of
purchase of spare parts, repair and maintenance ser-
vices as expected. Only for the case of machinery and
equipment purchased, we perceived some international
linkages.
In the next step of the research, for a sample of firms,
the quality of the relations together with the impacts of
these relations on the firm’s performance will be ex-
amined. The existence of leading firms will also be
investigated. The final stage will concentrate on those
firms. In conclusion, this study is a contribution to the
considerably poor literature on developing country
experiences of inter-firms relations.
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Appendix A. Inter-firm relations in Ankara 1 Industrial District
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Over time, the management literature has paid much attention to the topic of cooperation. The literature on cooperation can be divided into two broad parts, with one part focusing on cooperation within organizations (internal cooperation) and another addressing cooperation between organizations (external cooperation). Surprisingly, only little attention has been devoted to the relationship between internal and external cooperation, while there are clear indications that both types of cooperation are related. This article explores the nature of the relationship between internal and external cooperation by looking for clues in the existing literature on both types of cooperation as well as related subjects. We classify the findings of our literature review into five perspectives on the relationship between internal and external cooperation: (1) the involvement of both internal and external partners, (2) communication patterns, (3) organizational learning, (4) organizational norms and (5) internal cooperation as a coordination mechanism for external cooperation. Next, we compare the various perspectives and conclude by describing how these perspectives might be used for fruitful future investigations into the link between internal and external cooperation.