FDI in Turkey: Do investing companies seek to integrate people and cultures?

Cultural distance (CD) as a concept emerged in the international business literature, to better understand the performance of different forms of foreign investment. While the implications of national CD on strategies and behaviour of multinationals (MNEs) affecting market entry decisions have been studied, market integration and subsidiary control mechanisms have been largely neglected. Focussing on ‘how’ and ‘when’ CD influences social interactions and strategies within multinational organisations, this study investigates strategies and behaviour adopted by foreign investing firms in the Turkish market during the entry, integration and establishment phases thereby attempting to fill a gap in existing research. Novel empirical evidence from interviews within 12 industrial and commercial MNEs operating in Turkey and headquartered in Europe, Asia and Americas is addressed in this study. Such analysis is based on semi-structured in-depth interviews with Turkish managers working across various cultural contexts in Turkish subsidiaries. Furthermore, a quantitative survey conducted with local employees, has contributed valuable insights. While National CD appears to be irrelevant in the pre-market entry period, its role becomes significant during market integration performance and human resource management. Empirical evidence shows how an awareness of CDs helps in successful market integration leading to an improved subsidiary control style. Similarly, the correct use of acculturation systems encourages the positive implications of national CD within the MNEs’ international subsidiaries. This study fills a gap in existing CD research that has rarely given systematic and multi-dimensional attention to ‘how’ and ‘when’ national cultural differences influence social interactions and strategies within multinational organisations. Drawing on the existing literature and the primary data collected, this study provides a new holistic taxonomy of observed phenomena, by incorporating emerging market data in the wider empirical generalisations of the findings. The framework developed in this thesis for modelling the relationship between national CD and MNE business challenges, through their consecutive investment phases, has also provided evidence about the complexity and multi-level nature of the culture concept. Rapid globalisation makes it essential for MNEs to appreciate the cultural complexities that the assigned managers will face in their international subsidiaries and the need to support them in developing appropriate competencies. In turn, this will enable more accurate assessment of an organisation’s readiness to better implement its subsidiary management, market adaptation and internal social harmonization mechanisms in different national cultural settings. The framework developed in this thesis, and its empirical findings, will provide useful insights for future researchers in this area.