The Race between the Czech Republic and Turkey for Hyundai's Investment in Europe

Abstract

In 2005, the Hyundai Motors Corporation (HMC) started negotiations with the governments of the Czech Republic and Turkey for a potential direct investment aiming to serve mainly the European market. Both governments were aware that at the end of the negotiation process, only one of them would be able to get the planned USD1.5-billion car manufacturing plant. The bargaining process of the company with these governments ended with the decision of investing in the Czech land. Some authors argued that this was particularly due to the state capacity and successful bargaining strategy of the Czech government and the failure of the Turkish side. This paper, however, argues that the answer should be looked for in some other areas rather than solely in state capacity and skillful bargaining strategies. Foreign direct investment is a very complex issue, especially in the automobile industry. Locational advantages, for instance, in terms of infrastructure and industry clusters or proximity to target markets could be far more important than something else. The issues related to state capacity and skillful bargaining should be used just after the analysis of the major fundamental reasons behind FDI attraction. In other words, those governments aiming to attract FDI should first focus on creating such an environment which provides significant locational advantages for multinational corporations. Therefore, to understand such complexities, the race between the Czech Republic and Turkey for the Hyundai's USD1.5-billion manufacturing investment for the European market would be a useful case for analysis.