Psychic distance and FDI in Turkey: the role of industrial development and religion

Jimenez A., EREN T. M., Bayraktar S.

EUROPEAN JOURNAL OF INTERNATIONAL MANAGEMENT, vol.14, no.5, pp.775-795, 2020 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 14 Issue: 5
  • Publication Date: 2020
  • Doi Number: 10.1504/ejim.2020.109816
  • Journal Name: EUROPEAN JOURNAL OF INTERNATIONAL MANAGEMENT
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, Aerospace Database, Communication Abstracts, INSPEC, Metadex, Civil Engineering Abstracts
  • Page Numbers: pp.775-795
  • Keywords: psychic distance, foreign direct investment, emerging economies, Turkey, OECD countries, FOREIGN DIRECT-INVESTMENT, LOCATION CHOICES, ENTRY, PERFORMANCE, CULTURE, EUROPE, INTERNATIONALIZATION, DELOCALIZATION, DETERMINANTS, EXPERIENCE
  • Marmara University Affiliated: Yes

Abstract

Our paper analyses the critical role of psychic distance on Foreign Direct Investments (FDI) in an emerging economy, Turkey. Our results demonstrate that two psychic distance dimensions are significant when analysing FDI flows from OECD countries. First, psychic distance in industrial development has a positive effect, namely, greater industrial development distance between the investor country and Turkey increases FDI flows. Second, psychic distance in religion plays a negative role whereby greater distance between the investor country and Turkey reduces FDI flows. In addition, home country Gross Domestic Product (GDP) and European Union (EU) membership positively affect foreign investments in Turkey. By contrast, and as expected, geographic distance has a negative effect.