Investment motivations and institutional quality Cross-border mergers and acquisitions by Turkish MNCs

Abstract

The outward investment flow of Turkey has been rising since 2002, which makes it considerable due to the close relations of Turkish firms with Eastern and Western markets due to their geographic proximities. Theoretically based on the OLI paradigm and institutional theory, this study has investigated how macro-level factors affect the cross-border M&A activity of Turkish firms and how institutional differences endorse the effects of these factors for the period 2002–2013. Our findings indicate that Turkish firms prefer host countries with larger market sizes as a sign of their market-seeking investment behaviour. Additionally, this preference is stronger when the host country’s institutional development is better than that of the home country. However, we found that the strategic endowments in the host country don’t explain the intensity of cross-border M&As by Turkish firms. Also, the boosting effect of the institutional quality of the host country on the strategic-asset–seeking FDI is not supported. Finally, we have found a partial support for the OLI framework’s location-specific determinants of FDI in the case of the cross-border investment behaviour of Turkish MNCs.