IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/36568.html
   My bibliography  Save this paper

Determinants of foreign direct investment in Turkey: a panel study approach

Author

Listed:
  • Esiyok, Bulent

Abstract

This study examines the determinants of foreign direct investment (FDI) using a panel of bilateral outward FDI stocks of 19 OECD countries in Turkey between 1982 and 2007. Employing a knowledge-capital model, this study finds that joint national incomes, per capita difference, investment liberalisation and the cost of exporting to Turkey have significant effects on FDI in Turkey. In addition, the prospect of European Union membership, government stability, infrastructure, bilateral exchange rate, exchange rate volatility and openness to trade play an important role in determining the amount of FDI in Turkey. Finally, this study finds that high relative unit labour costs and corruption provide stimuli to FDI.

Suggested Citation

  • Esiyok, Bulent, 2011. "Determinants of foreign direct investment in Turkey: a panel study approach," MPRA Paper 36568, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36568
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/36568/1/MPRA_paper_36568.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Neumayer, Eric & Spess, Laura, 2005. "Do bilateral investment treaties increase foreign direct investment to developing countries?," World Development, Elsevier, vol. 33(10), pages 1567-1585, October.
    2. Yuko Kinoshita & Nauro F. Campos, 2003. "Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies," IMF Working Papers 2003/228, International Monetary Fund.
    3. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-1196, September.
    4. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0.
    5. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, vol. 87(Jan), pages 49-63.
    6. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    7. Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-873, November.
    8. Kimberly A. Clausing & Cosmina L. Dorobantu, 2005. "Re‐entering Europe: Does European Union candidacy boost foreign direct investment?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(1), pages 77-103, January.
    9. James R. Markusen & Keith E. Maskus, 2002. "Discriminating Among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
    10. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    11. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    12. Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
    13. Cheng, Leonard K. & Kwan, Yum K., 2000. "What are the determinants of the location of foreign direct investment? The Chinese experience," Journal of International Economics, Elsevier, vol. 51(2), pages 379-400, August.
    14. Globerman, Steven & Shapiro, Daniel, 2002. "Global Foreign Direct Investment Flows: The Role of Governance Infrastructure," World Development, Elsevier, vol. 30(11), pages 1899-1919, November.
    15. David W Loree & Stephen E Guisinger, 1995. "Policy and Non-Policy Determinants of U.S. Equity Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(2), pages 281-299, June.
    16. Disdier, Anne-Celia & Mayer, Thierry, 2004. "How different is Eastern Europe? Structure and determinants of location choices by French firms in Eastern and Western Europe," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 280-296, June.
    17. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 11855.
    18. repec:bla:econom:v:41:y:1974:i:162:p:176-93 is not listed on IDEAS
    19. Nagesh Kumar, 2000. "Explaining the geography and depth of international production: The case of US and Japanese multinational enterprises," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(3), pages 442-477, September.
    20. Ferda Halicioglu, 2005. "An Econometric Analysis of Foreign Direct Investment Flows into Turkey from Major Global Regions: 1975-1999," International Trade 0503004, University Library of Munich, Germany.
    21. Jameel Khadaroo & Boopen Seetanah, 2009. "The Role of Transport Infrastructure in FDI: Evidence from Africa using GMM Estimates," Journal of Transport Economics and Policy, University of Bath, vol. 43(3), pages 365-384, September.
    22. Takatoshi Ito & Mr. Tamim Bayoumi & Mr. Peter Isard & Mr. Steven A. Symansky, 1996. "Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region," IMF Occasional Papers 1996/011, International Monetary Fund.
    23. Piazolo, Daniel & Kokta, Robert M. & Buch, Claudia M., 2001. "Does the East Get What Would Otherwise Flow to the South? FDI Diversion in Europe," Kiel Working Papers 1061, Kiel Institute for the World Economy (IfW Kiel).
    24. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    25. David Hummels & Volodymyr Lugovskyy, 2006. "Are Matched Partner Trade Statistics a Usable Measure of Transportation Costs?," Review of International Economics, Wiley Blackwell, vol. 14(1), pages 69-86, February.
    26. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    27. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-544, September.
    28. Nagesh Kumar, 1998. "Multinational enterprises, regional economic integration, and export-platform production in the host countries: An empirical analysis for the US and Japanese corporations," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(3), pages 450-483, September.
    29. Egger, Peter & Winner, Hannes, 2006. "How Corruption Influences Foreign Direct Investment: A Panel Data Study," Economic Development and Cultural Change, University of Chicago Press, vol. 54(2), pages 459-486, January.
    30. repec:lic:licosd:8399 is not listed on IDEAS
    31. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    32. Laura Resmini, 2000. "The Determinants of Foreign Direct Investment in the CEECs: New evidence from sectoral patterns," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 665-689, November.
    33. Root, Franklin R & Ahmed, Ahmed A, 1979. "Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(4), pages 751-767, July.
    34. Cletus C. Coughlin & Eran Segev, 2000. "Foreign Direct Investment in China: A Spatial Econometric Study," The World Economy, Wiley Blackwell, vol. 23(1), pages 1-23, January.
    35. Dunning, John H, 1973. "The Determinants of International Production," Oxford Economic Papers, Oxford University Press, vol. 25(3), pages 289-336, November.
    36. Christian Bellak & Markus Leibrecht & Jože P. Damijan, 2009. "Infrastructure Endowment and Corporate Income Taxes as Determinants of Foreign Direct Investment in Central and Eastern European Countries," The World Economy, Wiley Blackwell, vol. 32(2), pages 267-290, February.
    37. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(1), pages 9-31, March.
    38. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
    39. World Bank, 2008. "World Development Indicators 2008," World Bank Publications - Books, The World Bank Group, number 28241.
    40. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    41. Zhang, Kevin Honglin & Markusen, James R., 1999. "Vertical multinationals and host-country characteristics," Journal of Development Economics, Elsevier, vol. 59(2), pages 233-252, August.
    42. Dunning, John H, 1979. "Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 269-295, November.
    43. Baier, Scott L. & Bergstrand, Jeffrey H., 2001. "The growth of world trade: tariffs, transport costs, and income similarity," Journal of International Economics, Elsevier, vol. 53(1), pages 1-27, February.
    44. Nagesh Kumar, 1994. "Determinants of Export Orientation of Foreign Production by U.S. Multinationals: An Inter-Country Analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 25(1), pages 141-156, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Faik Bilgili & Nadide S. Tülüce & Ibrahim Doğan & H. Hilal Bağlıtas, 2016. "The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts," Applied Economics, Taylor & Francis Journals, vol. 48(5), pages 345-360, January.
    2. Bulent Esiyok, 2015. "Does Inward Foreign Direct Investment Increase Imports To Turkey? An Instrumental Variables Approach," Journal Articles, Center For Economic Analyses, pages 23-35, June.
    3. Burcak Polat, 2015. "Determinants of FDI into Central and Eastern European Countries: Pull or Push Effect?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 3(4), pages 39-47.
    4. Charles Iweze & Gbenga Daniel Akinsola & Victoria Olushola Olanrewaju, 2020. "Determinants of Foreign Direct Investment in Turkey: Empirical Evidence from ARDL Approach," Asian Development Policy Review, Asian Economic and Social Society, vol. 8(4), pages 319-329, December.
    5. Massimo Albanese, 2021. "Mixed Methods in Business, Management and Accounting Research: an Experimental Design in the Entrepreneurship Domain," European Journal of Interdisciplinary Studies Articles, Revistia Research and Publishing, vol. 8, January -.
    6. Sanchez Martin, Miguel Eduardo & Escribano Frances, Gonzalo & de Arce Borda, Rafael, 2014. "How regional integration and transnational energy networks have boosted FDI in Turkey (and may cease to do so): a case study: how geo-political alliances and regional networks matter," Policy Research Working Paper Series 6970, The World Bank.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nielsen, Bo Bernhard & Asmussen, Christian Geisler & Weatherall, Cecilie Dohlmann, 2017. "The location choice of foreign direct investments: Empirical evidence and methodological challenges," Journal of World Business, Elsevier, vol. 52(1), pages 62-82.
    2. Bailey, Nicholas, 2018. "Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review," International Business Review, Elsevier, vol. 27(1), pages 139-148.
    3. Isabel Faeth, 2009. "Determinants Of Foreign Direct Investment – A Tale Of Nine Theoretical Models," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 165-196, February.
    4. Stack, Marie M. & Ravishankar, Geetha & Pentecost, Eric, 2017. "Foreign direct investment in the eastern European countries: Determinants and performance," Structural Change and Economic Dynamics, Elsevier, vol. 41(C), pages 86-97.
    5. Barbara M. Roberts & Steve Thompson & Katarzyna Mikolajczyk, 2008. "Privatization, Foreign Acquisition and the Motives for FDI in Eastern Europe," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 144(3), pages 408-427, October.
    6. Roberto Josep Martí & Maite Alguacil & Vicente Orts, 2013. "Where do foreign affiliates of Spanish multinational firms locate in developing and transition economies?," Working Papers 2013/19, Economics Department, Universitat Jaume I, Castellón (Spain).
    7. Mariam Camarero & Sergi Moliner & Cecilio Tamarit, 2021. "Is there a euro effect in the drivers of US FDI? New evidence using Bayesian model averaging techniques," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 157(4), pages 881-926, November.
    8. Andrzej Cieślik, 2020. "What attracts multinational enterprises from the new EU member states to Poland?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(2), pages 253-269, June.
    9. Natalia VECHIU, 2010. "Globalization and FDIs: determinants and competition effects in Central and Eastern European Countries," Working Papers 2010-2011_8, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Nov 2010.
    10. Ramona Jimborean & Anna Kelber, 2017. "Foreign Direct Investment Drivers and Growth in Central and Eastern Europe in the Aftermath of the 2007 Global Financial Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(1), pages 23-54, March.
    11. Sarker, Bibhuti & Serieux, John, 2023. "Multilevel determinants of FDI: A regional comparative analysis," Economic Systems, Elsevier, vol. 47(3).
    12. Chiara Franco & Francesco Rentocchini & Giuseppe Vittucci Marzetti, 2008. "Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments," Department of Economics Working Papers 0817, Department of Economics, University of Trento, Italia.
    13. Iamsiraroj, Sasi & Doucouliagos, Hristos, 2015. "Does growth attract FDI?," Economics Discussion Papers 2015-18, Kiel Institute for the World Economy (IfW Kiel).
    14. Tiago Loncan, 2021. "The Effects of Project Scale on FDI Location Choices: Evidence from Emerging Economies," Management International Review, Springer, vol. 61(2), pages 157-205, April.
    15. Andreia Olival, 2012. "The influence of Doing Business’ institutional variables in Foreign Direct Investment," GEE Papers 0048, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2012.
    16. Oana Cristina Popovici & Adrian Cantemir Călin, 2014. "FDI theories. A location-based approach," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 17(53), pages 3-24, September.
    17. Fathi Ali & Norbert Fiess & Ronald MacDonald, 2010. "Do Institutions Matter for Foreign Direct Investment?," Open Economies Review, Springer, vol. 21(2), pages 201-219, April.
    18. Andrea Ascani & Riccardo Crescenzi & Simona Iammarino, 2015. "Economic Institutions and the Location Strategies of European Multinationals in their Geographical Neighbourhood," LEQS – LSE 'Europe in Question' Discussion Paper Series 97, European Institute, LSE.
    19. Baltagi, Badi H. & Egger, Peter & Pfaffermayr, Michael, 2007. "Estimating models of complex FDI: Are there third-country effects?," Journal of Econometrics, Elsevier, vol. 140(1), pages 260-281, September.
    20. Yao, Shujie & Wang, Pan & Zhang, Jing & Ou, Jinghua, 2016. "Dynamic relationship between China's inward and outward foreign direct investments," China Economic Review, Elsevier, vol. 40(C), pages 54-70.

    More about this item

    Keywords

    Foreign direct investment; knowledge-capital framework; EU membership; Turkey;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36568. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.