Upgrading business investment in Turkey

Seyit Cilasun (), Rauf Gönenç, Utku Ozmen, Mehmed Zahid Samancıoǧlu, Fatih Yilmaz and Volker Ziemann

No 1532, OECD Economics Department Working Papers from OECD Publishing

Abstract: Starting from a low level in early 2000s, Turkey’s total capital stock has since expanded rapidly, but the composition and quality of investment raises questions. This study focuses on business investment, as the main driver of physical and knowledge-based capital formation and, hence, of potential output and the material foundations of well-being. Micro data allow to distinguish four types of firms: small businesses with a high rate of informality, medium-sized family firms, large formal corporations, and skilled start-ups. The relative importance of the challenges facing these different types of firms varies, notably with respect to skill shortcomings, regulatory burdens, labour costs, access to bank lending, over-leveraging and scarce equity capital. Improving the current business environment and overcoming the fragmentation of the business sector will be crucial to upgrade the quality of business investment and to enhance the allocative efficiency of capital formation. This calls for promoting formality, best management practices, the build-up of equity capital, access to long-term bank financing and other market-based financing that can complement traditional bank lending; and a faster and more inclusive transition to the digital economy.

Keywords: business investment; FDI; firm-level data; R&D; Turkey (search for similar items in EconPapers)
JEL-codes: D25 E2 F21 O16 (search for similar items in EconPapers)
Date: 2019-01-23
New Economics Papers: this item is included in nep-ara, nep-cfn, nep-mac and nep-sbm
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