FDI entry mode choice and ownership structure in Turkish market: A firm-level analysis

Abstract

The choice of a foreign firm’s entry mode into a host country is a strategic decision which impacts its future survival and success in other countries. By employing multinomial logit regression, this study aims to investigate the impact of the firm’s level of financial data on the entry mode decisions of investors and their ownership structure in Turkey from 2005 to 2012. The empirical findings have revealed that larger firms with high rate of profitability ratios are more likely to choose the full-ownership mode over others. On the other hand, a higher rate of return on equity increases the probability of investors choosing the shared-ownership mode.

Keywords:

• multinational corporations
• entry mode
• mergers and acquisitions
• foreign direct investment, joint venture companies

JEL classification codes:

• C25
• F21
• F23
• F24
• F29

Public Interest Statement

A key decision faced by multinational firms (MNFs) regarding the level of ownership, control, and risk-sharing is to determine which mode of entry will be pursued by investors. First, due to the unavailability of firm-level financial data of investing multinationals in Turkey, previous studies tried to measure ownership advantages of foreign affiliates by conducting questionnaires rather than employing raw data. This study attempts to determine the impact of firms’ financial strengths/weakness on the investors’ entry mode choice in Turkey by employing firm-level data. By doing so, four types of entry-modes have been analyzed that provide varying degree of control over investments.

Additional information

Funding

Funding. The author received no direct funding for this research.

Notes on contributors

Burçak Polat

Burçak Polat is an assistant professor Dr in the Department of Economics in Antalya International University. She is also head of the Economics Department of AIU. She earned her BS and master degree in Business Administration from the Cukurova University and Saint Leo University, respectively. She earned her PhD degree in Economics field from Eastern Mediterranean University.