KÜLTÜREL UZAKLIK VE KURUMLAR DEĞİŞKENLERİNİN DOĞRUDAN YABANCI YATIRIM KARARLARI ÜZERİNE ETKİSİ: TÜRKİYE - ÇİN ÖRNEĞİ

Year 2023, Volume: 2 Issue: 1, 87 - 118, 17.07.2023

Nihal Kartaltepe Behram , Göksel Ataman Berk , Dila Okcu

https://doi.org/10.58654/jebi.1197829

Abstract

Global changes in social, cultural and economic spheres and advances in technology and communication have made the world a global market where borders no longer exist. The importance of foreign investment has become undeniable with the emergence of the concept of foreign investment for developing economies. Due to its direct impact on the global market and its economy in transition, China is the focus of this research. The research aims to determine the interplay of variable factors influencing foreign direct investors and investment location choices with cultural distance and investment models, and to use the associated evaluation as a guide for investors. In this study, qualitative research methods are used to measure the impact of the variable factors that determine the hypotheses of the study on foreign direct investors and to evaluate the findings. In this study, designed with the technique of phenomenology, in-depth interview is used as the method of data collection and data analysis is done through descriptive analysis. All the research and interviews have revealed that FDI is very responsive to institutions and cultural distance. Moreover, agglomeration is the strongest determining factor for FDI in the Chinese market. The reason these factors encompass the sectoral aggregate are not the strongest factors is that agglomeration is the most important finding. This study is a useful guide for developed and developing countries as well as for the strategic plans of local and national institutions.

Keywords

Cultural Distance, Foreign Direct Investment, Multinational Companies, China

THE EFFECTS OF CULTURAL DISTANCE AND INSTITUTIONS ON FOREIGN DIRECT INVESTMENT CHOICES: A RESEARCH OF TURKEY & CHINA

Abstract

Global changes in social, cultural and economic spheres and advances in technology and communication have made the world a global market where borders no longer exist. The importance of foreign investment has become undeniable with the emergence of the concept of foreign investment for developing economies. Due to its direct impact on the global market and its economy in transition, China is the focus of this research. The research aims to determine the interplay of variable factors influencing foreign direct investors and investment location choices with cultural distance and investment models, and to use the associated evaluation as a guide for investors. In this study, qualitative research methods are used to measure the impact of the variable factors that determine the hypotheses of the study on foreign direct investors and to evaluate the findings. In this study, designed with the technique of phenomenology, in-depth interview is used as the method of data collection and data analysis is done through descriptive analysis. All the research and interviews have revealed that FDI is very responsive to institutions and cultural distance. Moreover, agglomeration is the strongest determining factor for FDI in the Chinese market. The reason these factors encompass the sectoral aggregate are not the strongest factors is that agglomeration is the most important finding. This study is a useful guide for developed and developing countries as well as for the strategic plans of local and national institutions.

Keywords

Cultural Distance, Foreign Direct Investment, Multinational Companies, China

References

• Aboal D., Noya N. & Rius A. (2014) ‘Contract Enforcement and Investment: A Systematic Review of the Evidence, Department for International Development’, V.64, pp.322-338.
• Ackerman, S. R. (1999) ‘Corruption and Government: Causes, Consequences and Reform, Cambridge University Press, Cambridge, UK, pp.91.
• Aizenman, J. & Spiegel, M. M. (2002) ‘Institutional Efficiency, Monitoring Costs and the Investment Share of FDI’, NBER Working Paper, 9324.
• Barkema, Harry G., Shenkar, O., Vermeulen, F. & Bell, J. H. J. (1997) ‘Working abroad, Working with Others: How firms learn to operate international joint ventures’, Academy of Management Journal, V40(2), pp.426-442..
• Brouthers, K. D. & Lance, E. (2001) ‘Explaining the National Cultural Distance Paradox (Impact of National Culture on Corporations’ International Entry Mode Selection)’, Journal of International Business Studies, V.23.
• Chang, J. & Rosenzweig, P. M. (2001) ‘The Choice of Entry Mode in Sequential Foreign Direct Investment’, Strategic Management Journal V.22. Decker, J. C. (2019) ‘Relationship Between Cultural Distance and Entry Mode by Western European Multinational Enterprises into Eastern Asia’. Doctorate Thesis, Arizona: Grand Canyon University.
• Deichmann, J., Karidis, S. & Sayek, S. (2003) ‘Foreign Direct Investment in Turkey: Regional Determinants’, Applied Economics. DEIK – Strateji ve İş Geliştirme Müşavirliği (2013) ‘Dünya’da ve Türkiye’de Yurtdışı Doğrudan Yatırımlar, Yurtdışı Yatırımlar İş Konseyi’, İstanbul. www.deik.org.tr, (08.11.2020).
• DEIK, Vale Columbia Center on Sustainable International Investment, Kadir Has University (2014) ‘Değerlenen Amerikan Dolarına Rağmen Türk Şirketlerinin Yurtdışı Yatırımları Artmaya Devam Ediyor’, İstanbul. www.deik.org.tr, (11.11.2020).
• Dikova, D., Witteloostuijn, A.V. & Parker, S., (2017) ‘Capability, environment and internationalization fit, and financial and marketing performance of MNEs’ foreign subsidiaries’, Cross Cultural & Strategic Management V.24(3), pp. 405-435.
• Dixit, A. K. & Pyndick, R. (1994) ‘Investment Under Uncertainty’, Princeton University Press, USA.
• Doherty, A. M. (1999) ‘Explaining International Retailers’ Market Entry Mode Strategy: Internalization Theory, Agency Theory and The Importance of Information Asymmetry’, The International Review of Retail, Distribution and Consumer Research, V.9.
• Du, J., Lu, Y. & Zhigang, T. (2009) ‘Institutions, Culture Distance, and FDI Location Choice: Evidence from China’, Working Paper Series, Chinese University of Hong Kong, National University of Singapore.
• Duan, Y., Huang L., Cheng H., Yang, L. & Ren, T., (2020) ‘The moderating effect of cultural distance on the cross-border knowledge management and innovation quality of multinational corporations’, Journal of Knowledge Management, V.15, pp.1-33.
• Duranton, G. & Diego, P. (2004) ‘Micro-foundations of Urban Agglomeration Economies’, Handbook of Regional and Urban Economies. Europe Commission. (2016) ‘Joint Communication To The European Parliament And The Council, Elements For A New Eu Strategy On China’, High Representative Of The Union For Foreign Affairs And Security Policy, pp.1-19.
• Fatehi, K. (1996) ‘International Management: A Cross-Cultural and Functional Perspective’, NJ: Prentice Hall, USA.
• Fung, Kwok-Chiu, Iizaka, H. & Parker, S. (2002) ‘Determinants of US and Japanese Direct Investment in China’, Journal of Comparative Economics.
• Gao, T. (2005) ‘Labor Quality and the Location of Foreign Direct Investment: Evidence from China’, China Economic Review, V.16, pp.274-292.
• Guimaraes, P., Figueiredo, O. & Woodward, D. (2000) ‘Agglomeration and the Location of Foreign Direct Investment in Portugal’, Journal of Urban Economics, V.47, pp.115-135.
• Hanson, G. (2001) ‘Should Countries Promote Foreign Direct Investment?, United Nations Conference on Trade and Development’, Center for International Development Harvard University, G-24 Discussion Paper Series No.9. http://unctad.org, (10.11.2020).
• Head, C. K., Ries, J. C. & Swenson, D. L. (1999) ‘Attracting Foreign Manufacturing: Investment Promotion and Agglomeration’, Regional Science and Urban Economics, V.29, pp.197-218.
• He, C. (2003) ‘Entry Mode and Location of Foreign Manufacturing Enterprises in China’, Eurasian Geography and Economics, V.44, pp.443-461.
• He, C. (2002) ‘Information Costs, Agglomeration Economies and the Location of Foreign Direct Investment in China’, Regional Studies, V.36, pp.1029-1036.
• He, C. (2003) ‘Location of Foreign Manufacturers in China: Agglomeration Economies and Country of Origin Effects’, Papers Regional Science, V.82, pp.351-372.
• He, X. (2008) ‘Formal Contract Enforcement and Economic Development in Urban and Rural China’, Paper prepared for NYU Conference on Law, Commerce and Development, NYU Law School, New York, pp.2.
• Hofstede, G. (2001) ‘Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Nations’, Sage, Thousand Oaks, CA.
• Hofstede, Insights (2020) ‘The 6 Dimensions of National Culture’, https://www.hofstede-insights.com/models/national-culture/, (12.11.2020)
• IMF – OECD (2003) ‘Foreign Direct Investment Statistics, How Countries Measure FDI 2001’, International Monetary Fund Publication Services, Washington D.C. USA. http://www.imf.org, (11.11.2020).
• Judge, W. Q., McNatt, D. B. & Xu, W. (2011) ‘The antecedents and effects of national corruption: a meta-analysis’, Journal of World Business, V.46(1), pp.93-103.
• Kim, H. G., Gaur, A. S. & Mukherjee, D. (2020) ‘Added cultural distance and ownership in crossborder acquisitions’. Cross Cultural & Strategic Management V.27(3), pp.487-510.
• Kogut, B. & Singh, H. (1998) ‘The Effect of National Culture on the Choice of Entry Mode’, Journal of International Business Studies, V.19(3).
• Kokko, A. & Blomström, M. (1997) ‘Regional Integration and Foreign Direct Investment’, NBER Working Paper Series, Cambridge.
• Laulajainen, R. & Stafford, H. A. (1995) ‘Corporate Geography: Business Location Principles and Cases’, Kluwer Academic, Dordrecht.
• Li, J. (1999) ‘Leading Effective International Joint Venture Leadership Teams in China’, Journal of World Business, V.34.
• Liu, A., Lu, C. & Wang, Z. (2020) ‘The roles of cultural and institutional distance in international trade: Evidence from China's trade with the Belt and Road countries’, China Economic Review V.61, pp.1-17.
• Loewendahl, H. & Loewendahl, E. E. (2001) ‘Turkey’s Performance in Attracting Foreign Direct Investment Implications of EU Enlargement’, European Network of Economic Policy Research Institutions, Working Paper No.8. http://aei.pitt.edu/1860/1/ENEPRI_WP08.pdf, (11.11.2020).
• López-Duarte, C., González-Loureiro, M., Vidal-Suárez, M. M., & González-Díaz, B. (2016), ‘International strategic alliances and national culture: Mapping the field and developing a research agenda’, Journal of World Business, V.51(4), pp.511–524.
• Minkov, M. (2018). ‘A revision of Hofstede’s model of national culture: old evidence and new data from 56 countries’, Cross Cultural & Strategic Management V.25(2), pp.231-256
• Monge-Naranjo, A. (2009) ‘Entrepreneurship and Firm Heterogeneity with Limited Enforcement’, Annals of Finance, V.5(3), pp.465-494.
• Morosini, P., Shane, S. & Singh, H. (1998) ‘National Cultural Distance and Cross-border Acquisition Performance’, Journal of International Business Studies, V.29, pp.1.
• Pelegrin, A. (2003) ‘Regional Distribution of Foreign Manufacturing Investment in Spain. Do Agglomeration Economies Matter?’, Institut d’Economia de Barcelona, Spain.
• Propris, L. D., Driffield, N. & Menghinello, S. (2003) ‘Local Industrial Systems and the Location of FDI in Italy’, International Journal of the Economics of Business, V.12, pp.105-121.
• Singh, D., Pattnaik, C., Lee, J.Y. and Gaur, A.S. (2019), ‘Subsidiary staffing, cultural friction, and subsidiary performance: evidence from Korean subsidiaries in 63 countries’, Human Resource Management, Vol. 58 No. 2, pp. 219-234.
• Smarzynska, B. & Kande Wei, S. J. (2000) ‘Corruption and Composition of Foreign Direct Investment’, NBER Working Paper 7969.
• Smith, D. F. & Florida, R. (1994) ‘Agglomeration and Industrial Location: An Econometric Analysis of Japanese-affiliated Manufacturing Establisment in Automative-related Industries’, Journal of Urban Economics, V.36, pp.23-41.
• T.C. Ticaret Bakanlığı. (2019) ‘Türkiye’nin Yurtdışı Yatırımları’ Yurtdışı Yatırım Raporu, pp.1-43.
• Tower, A.P., Heweet, K., Fenik, A.P. (2019) ‘The Role of Cultural Distance Across Quantiles of International Joint Venture Longevity’, Journal of International Marketing, V.27(4), pp.3-21
• TUIK. (2020). ‘Türkiye-Çin Halk Cumhuriyeti Ekonomik İlişkileri’. http://www.mfa.gov.tr/turkiye-cin-halk-cumhuriyeti-ekonomik-iliskileri.tr.mfa (9.11.2020). UNCTAD, http://unctadstat.unctad.org, (12.11.2020).
• Vaara, E., Sarala, R., Stahl, G. K. & Björkman, I. (2012) ‘The impact of organizational and national cultural differences on social conflict and knowledge transfer in international acquisitions’, Journal of Management Studies, V.49(1), pp.1-27.
• Wang, Y., Zheng, B., Kamal, M. A. & Ulah, A. (2020) ‘The influence of cultural and institutional distance on China’s OFDI efficiency: fresh evidence from stochastic frontier gravity model’, International Journal of Emerging Markets’, V.15, pp.1-22.
• Wang, Y., Yang, A. & Yasar, M. (2020) ‘A Multilevel investigation into the effect of cultural distance on bilateral trade: The roles of product type and uncertainty avoidance’, Canadian Journal of Administrative Science, V.10, pp.1-18.
• Wang, Z., Zhou, B. & Horsburgh, S. (2020) ‘Cultural Distance and Cross-Border Replication of China Multinational Corporations’. Forum for Social Economics, pp.1-23
• Wei, C. S. J. (2000) ‘Composition of Capital Flows and Currency Crises’, The World Bank Research Working Paper Series, 2429.
• Witkowski, T. H. (1998) ‘Consumer Ethnocentrism in Two Emerging Market: Determinants and Predictive Validity’, Advances in Consumer Research.
• Yavan, N. (2006) ‘Türkiye’de Doğrudan Yabancı Yatırımların Lokasyon Seçimi’, Doctorate Thesis, Istanbul: Ankara University SBE Iktisadi Arastirmalar Vakfi.