Internationalisation and Alliance Formation: Evidence from Turkish SMEs

This study explores the issue of internationalization through forming alliances with foreign capital in the small business sector in Turkey. Using a sample of 257 SMEs from this emerging market economy, collected via a field study, we investigate the impact of size (measured by investment levels and number of workers), sectoral preferences, factors causing low capacity utilization, management control, and the education level of CEOs on the alliance decisions of small firms. Multinomial logit estimations are employed to obtain a detailed and rich set of results. Overall, we find that Turkish SMEs would like foreign capital to help them expand their production capacity, while also serving as a conduit to convey their products to world markets. Size-specific, sectorspecific and management-specific factors are identified in the alliance behavior. We also investigate whether alliance motivation is a product of unidimensional or multidimensional decision-making process on the part of SMEs. Size, as shown by investment, and factors causing low capacity utilization are found to be the main contributors to the multidimensionality of the alliance motivation through influencing the alliance behavior predicted by other firm attributes.