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Why do the firms of a developing economy go abroad to invest?

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  • Gökhan Önder
  • Zeynep Karal Önder
  • Yılmaz Kılıçaslan
  • Yeşim Üçdoğruk Gürel

Abstract

The aim of this article is to examine the determinants of outward foreign direct investment (OFDI) of Turkish firms that differ from developed country MNEs with respect to firm size, technology, skills and access to information about global markets. The novelty of this study is to explore the determinants of country/region selection of Turkish OFDI at the firm level by using discrete choice models. Moreover, this study is based on data collected by in-depth-interviews with 299 outward-investing Turkish firms operating in manufacturing, wholesale and retail trade, transportation and storage, and information and communication technologies sectors. Findings show that as the size of the firm increases, the Turkish investors are less inclined to invest in EU countries, while the opposite holds for choosing other European countries as investment location. The share of foreign ownership has a negative impact on the decision to invest in EU countries. Finally, while willingness to diversify markets increase the probability of investing in EU countries, cost-oriented factors increase the probability of choosing other European countries to invest.

Suggested Citation

  • Gökhan Önder & Zeynep Karal Önder & Yılmaz Kılıçaslan & Yeşim Üçdoğruk Gürel, 2025. "Why do the firms of a developing economy go abroad to invest?," Applied Economics Letters, Taylor & Francis Journals, vol. 32(4), pages 528-537, February.
    • Handle: RePEc:taf:apeclt:v:32:y:2025:i:4:p:528-537
    DOI: 10.1080/13504851.2023.2276071
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