Institutional and transaction cost determinants of Turkish MNEs' location choice

Drawing on institutional and transaction cost theories, the purpose of this paper is to examine the location choice for a sample of 522 foreign affiliates of Turkish multinational enterprises (MNEs). Binary logistic regressions are conducted to test a number of hypotheses on the functional relationships between the hypothesized effect of variables and location choice of Turkish MNEs based on a secondary data drawn from official sources. In general, the findings provide support for the majority of the study's hypotheses and tend to confirm the theoretical perspectives adopted. The level of political constraints, the level of knowledge infrastructure in the host country market, subsidiary density, industry R&D intensity and subsidiary size are found to have the expected impact on the Turkish MNE's location choice among geographic alternatives. No support is found for the impact of ownership mode of subsidiary and the group affiliation on Turkish MNEs' location choice for their subsidiaries. The paper focuses on Turkish MNEs and the findings may not be generalizable to other emerging country (EC) MNEs. Also, the classification of geographic location into developed versus emerging countries may be too crude. In general, the paper posits that Turkish MNEs have a motive of strategic asset seeking to enhance their global competitiveness when they enter developed countries, whereas they simply attempt to exploit their firm-specific advantages or competencies when they access emerging countries. Given the increasing number of EC MNEs entering other emerging and developed markets, this paper adds to the understanding of the determinants of location strategies of Turkish MNEs by identifying key regional characteristics that lead Turkish MNEs to select particular locations, among the several geographic alternatives.