Foreign Direct Investment in Turkey: Regional Determinants

by

Selin Sayek
Bilkent University 

The uneven regional distribution of foreign direct investment (FDI) in Turkey poses an interesting question from the perspective of multinational firms (MNFs) and policy-makers alike. This paper focuses on the factors governing the location decisions of MNFs within Turkey with specific reference to policy implications. Using a conditional logit model, we find that agglomeration, depth of local financial markets, human capital, and coastal access dominate location decisions for the aggregate sample of foreign investors in Turkey. Our study reveals no evidence that public investment is successful in attracting MNFs to particular regions. Also importantly, the location determinants vary dramatically by broad industrial category, investment composition, and origin-country characteristics, including income category and region.