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ABSTRACT
In this article, we narrate a historical case study of a Turkish business group (BG) and engage in a dialogue with the existing theories that explain the transformation of BGs. The study builds on the multi-level theory of imprinting to illustrate how our focal group has been continually stamped by its founder's choices during sensitive times in its developmental trajectory. Collected evidence details how the entrepreneur's subsequent imprints are entrenched in the BG’s routines, simultaneously enabling and constraining its capabilities. By providing comprehensive evidence about the dynamic interplay among various endogenous and exogenous factors, we illustrate how abstract institutional conditions are reified in, and sometimes opposed by, agential action.
Acknowledgements
A previous and substantially different version of this article has been presented in the 2010 Annual Business History Conference held in Athens, GA. and published in Business and Economic History On-Line Proceedings. We acknowledge the helpful comments of Ertugrul Tokdemir in further development of the article.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. Morck, Wolfenzon and Yeung, “Corporate Governance”; Granovetter, “Coase Revisited.”
2. Khanna and Palepu, “Why Focused Strategies”; Ghemawat and Khanna, “The Nature.”
3. Guillén, “Business Groups.”
4. Chung, “Markets, Culture”; Hamilton and Biggart, “Market, Culture.”
5. Buğra, State and Business; Granovetter, “Business Groups.”
6. Amsden and Hikino, “Project Execution”; Khanna and Palepu, “Policy Shocks”; Khanna and Yafeh, “Business Groups.”
7. Khanna and Palepu, Winning; Guillén and Garcia-Canal, “Emerging Markets Rule.”
8. Hereafter usually referred to as the ‘Group.’
9. Yiu, Lu, Brutonand, and Hoskisson, “Business Groups,” 1553.
10. For unusual examples, see Liu, “Revisiting Hanyeping”; Peng, “Cooperation Against Competition.”
11. Carney and Gedajlovic, “The Co-evolution”; Dieleman and Sachs, “Coevolution.”
12. Yiu et al., “Business Groups.”
13. Çolpan, “Business Groups.”
14. Çolpan and Hikino, “Turkiye'nin Buyuk Sirketler.”
15. Gök¸en and Üsdiken, “Uniformity and Diversity”; Çolpan, “Business Groups.”
16. Öktem and Üsdiken, “Contingencies.”
17. Özkara, Kurt, and Karayormuk, “Turkiye'de Isletme Gruplari.”
18. Buğra, State and Business.
19. Marquis and Tilcsik, “Imprinting.”
20. Üsdiken, “Turkiye'de Isletme Gruplari.”
21. There is no other BG in Turkey exclusively owned and controlled by a charitable trust foundation. And as we will specify in the latter parts of the study, Elginkan Foundation is no longer controlled by a family member. Other major Turkish BGs, such as Koç, Sabanci, Borusan, Enka, and Eczaciba¸i also have affiliated foundations, often controlling a portion of the shares of the respective holding firm. Yet in none of these BGs do the affiliated foundations control a majority share, nor are these foundations governed by non-family outsiders.
22. Kock and Guillén, “Strategy and Structure”; Chung and Luo, “Human Agents”; Dieleman and Sachs, “Coevolution.”
23. His full name is Hüseyin Ekrem Elginkan. We chose to refer to him as ‘Ekrem Elginkan’, ‘Ekrem’, or ‘Elginkan’ interchangebly hereafter due to space concerns.
24. Stinchcombe, “Social Structure.”
25. Ibid., 169–170.
26. See for example Boeker, “Strategic Change”; Baron, Burton, and Hannan, “Engineering Bureaucracy.”
27. Johnson, “What is Organizational Imprinting?,” 99.
28. Ibid.
29. Dieleman and Sachs, “Coevolution.”
30. Marquis and Tilcsik, “Imprinting.”
31. Ibid., 199.
32. Ibid.
33. Gök¸en and Üsdiken, “Uniformity and Diversity”; Öktem and Usdiken, “Contingencies.”
34. Çolpan and Hikino, “Türkiye'nin Büyük Sirketler.”
35. Marquis and Tilcsik, “Imprinting,” 222.
36. Üsdiken and Kieser, “Introduction.”
37. Kieser, “Why Organization,” 618.
38. Details about hermeneutical textual analysis are discussed in Thatchenkery, “Mining for Meaning.”
39. Marquis and Tilcsik, “Imprinting,” 199–200.
40. We hereafter refer to the private archives of the entrepreneur as PAE and the archives of the holding company as AHC.
41. Entitled Anılar I and Anılar II, these two edited volumes were uncovered in the PAE. These volumes contained autobiographical accounts by Ekrem Elginkan about the early period instances (1925–1966) as well as accompanying accounts written by seven of his friends. In total, the first volume contained 83 and the second 109 typewritten pages.These notes also contained detailed lists of projects completed by Elginler Construction Company, maps, figures, written letters, company memos, and photographs. We will hereafter refer to these volumes as Anılar I and II.
42. For a discussion of generic capability lists, see Amsden and Hikino, “Project Execution”; Kock and Guillen, “Strategy and Structure.”
43. Day, “The Capabilities.” We chose to adopt Day's capability list over others because it was more comprehensive and included skills that spanned a corporation's entire value chain from upstream to downstream.
44. Ibid., 41.
45. Ibid., 41.
46. Ibid., 41–42.
47. Toprak, “Yayımlanmamı¸ Bir Monografiden İzmir, 1920–1921.”
48. There were various accounts in Anılar I, which demonstrated how he managed to survive only because of a small amount of money sent by his grandfather and regular shipments of food sent by his parents, 8.
49. There were only 740 graduates of Yüksek Mühendis Mektebi(ITU's former name) from 1928 to 1944.
50. For example, Nejat Önal and Edip Haznedar were graduates of ITU who worked for government offices during the early 1950s. They both helped Elginkan in his efforts to bid for various contracting projects. Interview with Nejat Önal, former partner, (April 24, 2006); Interview with Edip Haznedar, (former executive and partner), April 24, 2006).
51. Thornburg, Spry, and Soule, Turkey; Barker, J. M., B. U. Ratchford, E. R. Hondelink, T. J.Kauffeld, R. W. Kerwin, L. E. Kirk, W. P. H. Lightbody, G. S. Mason, W. H. Nicholls, E. E. Olson, R. A. Rennie, M. Ross, The Economy of Turkey: An Analysis and Recommendation for a Development Program. Baltimore, MD: IBRD and John Hopkins Press, 1951.
52. Pamuk, Türkiye'nin İki Yüz Yıllık İktisadi Tarihi, 230.
53. Elginkan noted that he managed to make substantial profits by timely imports of pipes, radiators, and fittings during 1952 and 1953, Anılar II, 13. He sought other opportunities to expand his business when this option became no longer viable after 1954.
54. Scholars of social history in Turkey tend to portray Elginkan's generation as the first generation of the Republic, raised with a strong cultivation for “national development” to “close the gap between modern Western Civilization”; Baydar and Dinçel, 75 Yılda Çarkları Döndürenler, 1.
55. Pamuk, Türkiye'nin İki Yüz Yıllık İktisadi Tarihi.
56. Ahmad, The Making, 113.
57. Kock and Guillén claim that these skills play an important part in early-stage development in BG structures in a developing economy, “Strategy and Structure,” 95.
58. Üsdiken, “Turkiye'de Isletme Gruplari.”
59. Hirschmann, “The Political Economy.”
60. The credit was offered according to the bilateral economic and technical cooperation agreement (signed in 1955).
61. Halim Doğrusöz, a classmate from ITU, worked as the principal consultant during this stage. Interview with Halim Doğrusöz, (April 27, 2006).
62. The ECA title refers to an acrostic, derived from the first names of family members: Ekrem, Cahit,and Ahmet (father).
63. Oktay Özaras, who joined the Elginkan Group in 1965 from the Machinery and Chemical Industry Institute – an SEE specialising in precision artillery and arms production – noted that the capacities of the polishing and chrome-plating lines were not optimised according to the upstream molding processes, Interview with Oktay Özaras, former executive, (June 14, 2006).
64. Memo for ECA's 15th Anniversary, 4.
65. Gürpınar, Anılar II, 78.
66. Elginkan's typewritten response to a survey of 1948 ITU graduates.
67. Elginler Construction Company Brochure.
68. Selahattin Tibet, manager of the unit in those years, explained that the company did not engage in transnational and local partnerships in spite of many offers. Moreover, technical know-how was attained mostly with primitive methods like simple reverse engineering and trial and error. Tibet, Anılar I, 75.
69. Almost all these staff were personally recruited by Elginkan. He convinced some of his former classmates, either working in various government offices at the time or with whom he had worked during his contracting years, to come and work for him at the Elginkan Group.
70. We base this reflection upon the many letters and documents in the PAE and the accounts of early-period managers, Anılar I.
71. Tibet and Özaras claimed that Elginkan wanted to hear the opinions of different department heads on a matter. During the early era, there was no shortage of demand, discussions and negotiations were always carried out according to engineering calculations and methods. Tibet, Anılar I; Interview with Oktay Özaras, (June 14, 2006).
72. He was drowned off one of Istanbul's famous beaches.
73. Kepenek and Yenturk, Turkiye Ekonomisi.
74. Ahmad, The Making, 132.
75. The unionised work force as a percentage of total workforce rose from 10.8% in 1963 to 29.6% in 1971, TCÇB, 50 Yılda Çalı¸ma Hayatımız, 26.
76. From 1962 to 1977, Turkey's GDP continuously increased, at an annual average rate of 6%, Pamuk, Türkiye'nin İki Yüz Yıllık İktisadi Tarihi, 239.
77. Handwritten documents and scripts in PAE.
78. He recruited Oktay Özaras in 1965 based on a family connection. Then Özaras invited İbrahim Hakkı Balıkçı, Nuray Akarçay, and Muharrem Kaynar from the Machinery and Chemical Industry Institute to join the group. Yüksel Ba¸demir followed that trio in 1972. All these men worked for the Group many years and eventually became top executives in it.
79. Koç Holding, founded in 1963, represents the pioneering example of the family holding form in Turkey.
80. Although it was not formally stated, Oba assumed responsibility for all of the Group's financial and administrative matters, whereas Özaras assumed responsibility for all the technical issues.This informal arrangement lasted until the formation of formal committees among top management in late 1970s. Interviews with Ahmet Şahin, former executive, (May 09/17, 2006).
81. The protests of 15–16 June, 1970 were triggered by the government's attempts to restrict labor union membership conditions. Including ECA, a total of 168 companies were affected by the event and five people were killed during the clashes. Ate¸oğulları, 15–16 Haziran, 35.
82. According to the accounts of his executives, even under the harsh conditions of the company's establishment period, Elginkan never delayed the payments of employee wages and strictly followed regulations about wages and social security rights. Interviews with Ahmet Şahin (May 09/17, 2006).
83. Interview with Yüksel Ba¸demir, former general coordinator (May 25, 2006); Interview with Yücal Unan, former general coordinator (January 10, 2007).
84. In 1994 Elginkan made a single visit to one of his factories, General Coordinator's Meeting Memo.
85. We found detailed work-flow charts, role prescriptions, and organisational charts –dated 1972-– that specified within-group and within-affiliated company structure in PAE.
86. The TMT was composed of Oktay Özaras, Kamil Oba, and Melih Bölükba¸ı in 1973. At the end of 1978, TMT members became rather static. Özaras and Oba kept their positions, Bölükba¸ı retired, and Nuray Akarçay, Fikret Dirilgen, Yılmaz Güngör, and Yüksel Ba¸demir became new members.
87. Scholars noted that more than 5000 people were killed during the clashes between different political supporters in this period, Özdemir, “Siyasal Tarih (1960–1980),” 290.
88. Indeed, the change in national economic strategy occurred with the declaration of the January 24th, 1980 decisions. The mastermind behind those decisions was Turgut Özal. Implementation of the strategy accelerated when Özal's Motherland Party won the 1983 elections and he became prime minister. For a more comprehensive treatment, see Ahmad, The Making of Modern Turkey, 183–195.
89. From 1978 to 1989 the average annual increase in the construction and manufacturing industries was 4.7%, compared to a 3% increase in GDP, Kepenek and Yentürk, Türkiye Ekonomisi, 322–323.
90. The model is premised upon a belief that the mutual collaborative practices of small and flexible manufacturing units, organised under geographically condensed industrial districts,will provide better added value.
91. Gaetano Eberle was Elginkan's personal acquaintance and a significant business partner. He acted as a consultant and arranged many technological connections in Italy and other countries in Europe, especially during the 1970s and 1980s. Interview with Gaetano Eberle (May 22, 2006).
92. Even though members of the former TMT, for example,Ba¸demir and Özaras, referred to the Italian model during the interviews, they knew that their BG was not an exact replica. They were mostly inspired by the flexible and dynamic nature of cooperation between various small units in the Italian model.
93. According to Ariman, Turkiye'de Sermaye Yogunlasmasi, 256; the Elginkan Group was the fastest-growing group in the second half of the 1970s among a total of 34 BGs analysed.
94. Elginkan's personal interest in this industry began long ago, and his mother's illness in the late 1970s increased this interest, making Elginkan more aware of drugs and healthcare services. Interview with Ba¸demir; Interview; with Özaras.
95. Personnel Committee Report, TP 87–41.
96. The group resorted to external financing during the expansion period, which from time to time reached 80% of consolidated revenues, Annual Consolidated Financial Reports.
97. Company Report, ‘ECA-Elginkan Topluluğu'nun Geli¸mesi.’
98. Auditing Committee Report (August 13, 1986).
99. With the introduction of the export-oriented strategy, the current account deficit was controlled between a minimum of 3 billion and a maximum of 4.2 billion USD between 1981 and 1989, Kepenek and Yenturk, Turkiye Ekonomisi, 258. Annual consumer price index increases oscillated between 22% and 60% between 1981 and 1989. TUIK, http://www.tuik.gov.tr/PreTablo.do?alt_id=1014, accessed 24.05.2014.
100. Sönmez, Kırk Haramiler.
101. A large-scale modernisation investment was made in ceramic tiles in 1986, and the pharmacy business'working capital requirements constantly increased in 1986 and 1987. Documents, SERG, 86–65; SAG 88–92.
102. One of these high-ranking managers, Mehmet Gürpınar, resigned in 1992.
103. Ruhrgas was acquired by E.ON in 2003.
104. Document no KG-87-120.
105. Interview with Özaras (June 14, 2006); Interview with Fikret Dirilgen, former executive (January 29, 2007).
106. Süleyman Demirel, former president and prime minister, and Necmettin Erbakan, former prime minister, were classmates of Elginkan at ITU.
107. A total of nine governments were formed from 1993 to 2002, many of which were coalitions between different parties, TCB, http://www.basbakanlik.gov.tr/Forms/_Global/_Government/pg_CabinetHistory.aspx, accessed 24.05.2014.
108. From 1990 to 2002, annual GDP fluctuated between 9.4% and -9,4%, seeing negative numbers in three different years. Beyazıt, “Türkiye Ekonomisi,” 90.
109. From 1990 to 2001, consumer price index increases were always above 30%, soaring up to 100% and more in some years, TUIK, http://www.tuik.gov.tr/PreTablo.do?alt_id=1014, accessed 24.05.2014.
110. Keyman and Öni¸, “Turkish Politics,” 148.
111. Annual consumer price index increases were controlled under 10% after 2004,TUIK, http://www.tuik.gov.tr/PreTablo.do?alt_id=1014, accessed 24.05.2014.
112. From 2002 to 2010, average annual GDP increased by approximately 6%.TUIK, http://www.tuik.gov.tr/PreTablo.do?alt_id=1045, accessed 24.05.2014.
113. The Group's consolidated income was negative in 1991 and 1992, Topluluğumuzun 1968–1994 Yılları, 11.
114. Memoirs I, 12.
115. These two acquisitions were Sitam (1987) and Üstay (1990), both of which operated in the pharmaceutical industry, Documents SAG-87-17; SAG-90-5. Interview with Özaras, (June 14, 2006).
116. We found many small notes in his office that questioned his existence and primary motivation to live.
117. Mehmet Gürpınar was the first top executive to leave in 1992. Özaras and Güngör left in 1993, followed by Akarçay and Oba in 1994. The last to leave were Dirilgen and Ba¸demir in 1996.
118. In his last note to the managers of the Elginkan Group, Elginkan emphasised the objective of ‘eternal organization’, a concept that underlined continuity. In that note, he also divulged his choice of related diversification over unrelated diversification, Handwitten Note in PAE.
119. See Buğra, State and Business.
120. The board was composed of 34 trustees, including Ekrem Elginkan, Elginkan Vakfı Vakıf Senedi.
121. Many other prominent BGs in Turkey had completed their IPOs long before. To provide a few examples, Eczacıba¸ı and Alarko Holding's IPOs were in 1974, Koç Holding's in 1986, Sabancı Holding's in 1997.
122. The new appointments were İsmail Balıkçı, Yücel Unan, Muharrem Kaynar, and Gaye Akçen. Among these members, only Akçen was not an engineer. All began to work with the Group in the late 1960s or early 1970s, see endnote 96. Gaye Akçen was the foster daughter of Elginkan.
123. In 2003, the governance structure, role, responsibility and work processes of the trust foundation were consolidated into a small booklet, Elginkan Vakfı ve Topluluk Şirketlerinin Yönetim İlkeleri ve Usulleri.
124. The board was called the Executive Committee of Elginkan Group Corporations (ETIM), Elginkan Vakfı ve Topluluk Şirketlerinin Yönetim İlkeleri ve Usulleri, 9–10.
125. Interview with Gaye Akçen, executive and foster daughter (January 08, 2007).
126. Kock and Guillén, “Strategy and Structure.”
127. Khanna and Palepu, “Policy Shocks.”