Analyzing activities of multinational enterprises through foreign direct investment patterns : a value chain based perspective

Abstract

Main aim of this study is to analyze foreign direct investment patterns of multinational enterprises in Turkey by attempting to understand their relation with type of competitive advantage pursued by the firm and firm performance. Value chain framework has been used in the study while classifying foreign direct investments as “upstream” and “downstream”, and also certain dynamics as degree of coordination/integration in the corporate network, degree of subsidiary autonomy, and certain environmental factors like degree of across density and within density in the MNE network have been taken into account while developing research hypotheses. The research model and related hypotheses are tested using data from 95 multinational enterprises all of which are International Investors Association of Turkey (YASED) members. The results indicate that, while the mediating role of differentiation based competitive advantage prevails in the relationship between all types of investments and firm performance, this role is valid for cost leadership based competitive advantage only in terms of export performance. Furthermore, the results point out the significant role of within density for firms in creating both types of competitive advantages. Also, it is found that, degree of global coordination/integration in the MNE network is negatively related to degree of subsidiary autonomy.