Foreign Direct Investment and Location Specific Determinants: an empirical analysis on Italian investments in Turkey

The recent economic crisis has mined the positive trends achieved by the global economies in the last decade. Some of the countries that better recovered from this downturn are those characterized by a recent steep economic growth, based on effective economic policies and which dispose of a productive and cost effective industrial sector: the Emerging Economies. In this paper I wanted to analyze the location specific determinants of Turkey, one of the Countries that achieved the highest economic growth in the last decade. The “Location Specific Determinants” are those factors of different nature, embedded in the profile of a Country, which represent an attraction for the activity of foreign companies, driving them to realize Foreign Direct Investments in the said Country. The first part of the research will be dedicated to the exploration the theoretical background in which the Foreign Direct Investment is defined. The topic has been widely discussed, and different classifications and model has been built in order better describe the foreign investments dynamics and investors decisions. After it, we will make a panoramic on the phenomenon in the current world, analyzing trends and world areas players. In the second part we will define the Turkey’s business environment. From a wide panoramic shot, we will go deeper, trying to explain the recent economic trends, the location specific determinants, the active sectors and the investment opportunities in this Emerging Economy. The third and last part will be dedicated to the analysis of the FDI Inflows in Turkey from Italian companies, as the two countries are, respectively, between their own biggest commercial partners. In developing this analysis, the data that I elaborated will be interpreted through the two lenses discussed in the previous chapters. This will allow us to classify the Italian investments in Turkey, spotting particular trends, when compared with the overall inflows, and understanding the motivations behind every recorded trend.