Links Amongst Innovation, Corporate Social Responsibility, Sustainability, and Intrnationalization Processes of Emerging Market
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Table of Contents I. Chapter: Introduction 2 II. Chapter: Background Information on TBGs 6 III. Chapter: Theoretical Discussion – Previous Literature 7 III.i Business Groups 9 III.ii Innovation 14 III.iii Corporate Governance / Corporate Social Responsibility 36 III.iv Sustainability, Innovation and Networks 43 IV. Chapter: Propopsition Development 45 V. Data & Methodology 56 V.i Data 56 V.ii Methodology – I: Descriptive Study: 61 V.iii Methodology - II: Case Study Method: 66 V.iii.i Case 1: Arçelik 68 V.iii.ii Case 2: Zorlu Holding 73 V.iii.iii Case 3: Sabanci Holding 79 V.iii.iv Case 4: Borusan Holding 83 VI. Chapter: Conclusion 90 VII. Works Cited 93 VIII. Appendix 107 Dedication I dedicate this dissertation to my family, Dr. F. Figen Ar and Dr. Irfan Ar. If it were not for their constant support, encouragement, and unfailing confidence in my potential to become an exemplary scholar, I would not be able to complete my work. I never will be able to thank them enough. I will always in great debt of them. Acknowledgments I owe a great deal of gratitude to Dr. Aysun Ficici who does not only chair my doctoral committee, but also guide me through my higher education journey. I always am and always will be grateful for her patience, guidance, assistance, encouragement, and her mentorship throughout my master’s and doctoral programs. She has always there for me. Without her constant support and mentorship, this dissertation would not have been possible. I would like to acknowledge my committee members for their support and contribution to my thesis. Thank you Dr. Massood Samii, Dr. Tej Dhakar, and Dr. Leila Samii for your time, help, and support. In addition, I would like to extend my acknowledgments to Dr. Lowell “Chris” Matthews. He has been a great support during my entire journey at Southern New Hampshire University. Thank you so much, Dr. Matthews. In addition, I would like to thank the International Business Faculty and all Southern New Hampshire University family for giving me this opportunity to fulfill my dream to become a Ph.D. holder. Thank you. I would like to sincerely thank to all members of Ar and Unurlu families. Especailly, I would like to thank my grandparents, aunts, and uncle. They always there for me. In addition, if it were not for their financial and moral support, this dissertation would not be in existence. In my final words, I would like to thank Peterson family. Thank you for your support and kind hospitality. Abstract The purpose of this dissertation is to explore the Emerging Market Manufacturing Business Groups’ innovation processes through their internationalization activities and the interplay between innovation, corporate social responsibility, and sustainability. This study focuses on the business dynamics of manufacturing Turkish Business Groups (TBGs), namely Turkish Holding Companies. It gives a clear illustration of how manufacturing can be innovative, responsible, and sustainable while internationalizing and exceling the firms’ competitive advantage through utilizing both foreign and domestic resources. The study comprises Turkish manufacturing multinationals that operate in the continent of Europe. It examines 15 parent firms and 72 subsidiaries that conduct manufacturing operations in the European countries. The study employs explanatory case study approach. The results demonstrate that manufacturing operations of TBGs can be innovative, social responsible, and environmentally sustainable while internationalizing into advanced countries. Keywords: Emerging Market Manufacturing Business Groups, Sustainability, Innovation, Network Systems, Turkish Business Groups, and Internationalization. 1 I. Chapter: Introduction Over the last decade, the experience of fast economic growth, and the transformation to more liberalized market systems in emerging market (EM) countries has motivated multinational corporations that originate in these markets to begin and/or to accelerate their investments and internationalization process in host countries in a large geographical scope. With this initiation, the global economy has been witnessing worldwide foreign direct investment (FDI) propelled, more and more, by Emerging Market Multinationals (EMC), and Emerging Market Business Groups (EMBGs). Recently, these multinationals are becoming more integrated into the global market through their internationalization processes, not only in developing countries, but in developed countries with advanced economies as well. Specifically, the investment efforts of EMCs into advanced economy countries have significantly increased (United Nations Conference On Trade and Development, 2015). Hence, EMCs from emerging markets, such as China, India, Mexico, and Turkey have been embarking diverse operations in developed countries. These EMCs have contributed to little over than one- quarter of total world FDI by 2017. 26,000 business groups from Emerging Market have presence in advanced countries (Belenzon et al., 2012). Some of the prominent firms that have been undertaking operations in advanced economies are Turkish Business Groups (TBGs), namely Turkish Holding Companies (THCs), which are also family owned companies. These Holding companies have been conducting manufacturing operations in numerous countries of Europe for many decades. In recent years, their operations took on innovation and environmental sustainability as the core principles in order to gain and to sustain competitive advantage. In doing so, 2 they became efficacious in their international operations. However, it must be noted here that this efficacy is also related to their organizational forms and/or corporate governance structures. The map below demonstrates the international expansion of the TBGs. Map 1 : Geographic Expansion of TBGs (created by the author). Overall, the acceleration of Turkish Multinationals’ internationalization processes into the mostly developed countries of the European Union (EU) is an intriguing phenomenon is the main motivation of the study. This motivation is also shaped by their successful and rapid expansions into EU, and their creation of manufacturing facilities in these countries. In addition, TBGs have become more noticeable in providing employment to EU citizens, and supplying the demand of EU consumers with innovative technological products. Therefore, there is a need for studies that investigate how 3 innovation, sustainability, corporate social responsibility factors and their linkages play a role in the internationalization processes of emerging market multinationals (Narula, 2012; Buckley & Tian, 2017; Krammer et al., 2017; Yaprak & Karademir, 2016). Yet, IB theories revolved around standalone firms. Therefore, there is a need of research on business groups in theory building (Holmes Jr. et. al., 2016). There is a need because linkages amongst innovation, corporate social responsibility, and sustainability factors, and whether they promote and enhance internationalization processes of TBGs has not been studied by the previous literature. The examination of emerging market multinationals’ internationalization processes is an area that has not been covered in the previous International Business Literature in the perspective of business groups. Along with the issues that relate to internationalization processes of firms there are also some trepidations that include social and environmental issues that come up while the firms internationalize. Having facing these issues, these firms have been trying to integrate innovation, corporate social responsibility, and sustainability into their everyday operations. When examining the previous theories, there seems to be a void in explaining their way of conducting businesses in advanced countries. Thus, the purpose of this research is to investigate the dynamic interrelationships of innovation, corporate social responsibility, and sustainability factors in the internationalization processes of Turkish Multinationals, specifically Turkish Business Groups. Therefore, the research analyzes how each factor is integrated into internationalization process of TGBs. This study is empirical, explanatory and descriptive 4 as it focuses on the business dynamics of manufacturing Turkish Business Groups, namely Turkish Holding Companies. It gives a clear illustration of how manufacturing can be innovative and environmentally sustainable while internationalizing. The study is also normative as it provides propositions based on creating ownership advantage and competitive advantage through combining foreign and domestic resources and with the support of their organizational forms and/or corporate governance structures. It also reconnoiters the main reasons and key drivers for innovation, corporate social responsibility, and sustainability while internationalizing. Deriving from the above research statement, the research questions can be stated as follows: 1a) How do innovation, corporate social responsibility, and sustainability activities of TBGs relate to their internationalization processes? 2) Do TBGs integrate innovation, Corporate Social Responsibility (CSR), and sustainability to their internationalization processes? 3) How are innovation, CSR, and sustainability interrelated? 4) In what ways TBGs integrate innovation, CSR, and sustainability in to their internationalization processes? 5) What are the innovative activities TBGs utilize while internationalizing? 6) What are the corporate social responsibility activities TBGs utilize while internationalizing? 7) What are the environmentally