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Turkish GDP per capita and GDP growth, 1923-1990. Source: Compiled and drawn based on Maddison, "Statistics on World Population, GDP and Per Capita GDP, 1 -2006 AD." Available at: www.ggdc.net/maddison, 2009; revenue data provided by Koc Holding. Note: Real GDP per capita data is shown in 1990 international Geary-Khamis dollars. Real GDP growth is shown in percentages.
Source publication
The case describes the creation of Turkey's largest business group by Vehbi Koc. The foundation of this group in the interwar years, and its subsequent diversification into many industries, including automobiles, household goods, and services, are analysed. The case serves as a vehicle to explain why diversified business groups are so important in...
Context in source publication
Context 1
... The Foreign Capital Incentive Law was enacted in 1950 to encourage Foreign Direct Investment (FDI), but in practice bureaucratic and legal complexities and hurdles resulted in few foreign firms entering Turkey. 19 The overall economic environment was highly volatile during this period up to the mid-1950s although GDP per capita rose steadily (See Figure 1). After 1960, when an army coup overthrew the government, policies were characterised by planned economic development with protectionist trade policies. ...
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Citations
... Nonetheless, even government procurers, circumventing their own foreign exchange controls, bought trucks and other scarce imports from Koç firms. These black-market profits later helped the group expand (Colpan & Jones, 2013;. ...
... Böylece Otosan' da saç karoserli otomobil yapımı fikri ortaya atılmıştır. Nahum, Cortina-Taunus marka otomobillerinin kalıplarını ucuz fiyatla alıp bu projeyi hayata geçirerek işin devamlılığını sağlamıştır (Colpan ve Jones, 2011). 1994'te TOFAŞ Otomobil Fabrikaları Genel Müdürü iken FIAT'ın Türkiye' deki Tempra üretim ve ihracatı projesini yürütmeye başlayan Jan Nahum ve Kofisa Trading Co.S.A'nın yönetim kurulu üyesi Claude Nahum ise, Bernar Nahum'un oğullarıdır (Salom Gazetesi, 2014). ...
... After making very large profits from truck importing during World War II, a war Turkey stayed out of until just before the end, Koç began to build what became Turkey's largest diversified business group during the postwar decades. 90 These entrepreneurial pioneers across the Rest faced multiple challenges. Chinese firms, for example, had to deal with chronic political instability, and the Japanese military attack on the country after 1931. ...
... 89 However, there were other factors behind these postwar US shifts to Scotland, which in fact began to slow down just as more assertive regional policies began to be pursued in the late 1950s. 90 The region had a pool of skilled labor in engineering and shipbuilding, and the US investment in Scotland was very heavily concentrated in engineering. Whatever the motivation, the employment impact in a region of above-average unemployment was considerable. ...
... In return, Beiersdorf offered his son Paul Zimmermann a 5-year contract as chief executive of the Italian company. 90 This concession allowed Zimmerman to continue pursuing a "dynastic motive" for the company that he had managed for several decades. 91 In 1963, the Italian firm belonged once again to Beiersdorf. ...
This article provides a historical perspective to current debates whether large global firms are becoming «stateless» and whether this is a historically new phenomenon. It shows that a great deal of international business in the nineteenth century was not easily fitted into national categories. The place of registration, the nationality of shareholders, and the nationality of management could and quite often did point in different directions. During the twentieth century such «cosmopolitan capitalism» was replaced by sharper national identities. However the interwar disintegration of the international economy led to the subsidiaries of multinationals taking on stronger local identities and becoming «hybrids». Over the past two decades, as the pace of globalization quickened, ambiguities increased again, especially if the focus is the «nationality» of products and services. Yet ownership, location and geography still matter enormously in global business.
Studies on business groups, a collection of legally separate firms operating in unrelated industries under common control, tend to compare the behavior of firms affiliated with business groups and firms that are independent companies. Unfortunately, this ignores the diversity among business groups based on their controlling owner. Hence, in this conceptual article, we study how the types of controlling owners impact the diversification and internationalization of business groups. Building on agency theory, we separate business groups into five types based on their ultimate controlling owners (state, labor, family, mutual, and bank) and identify their nonfinancial objectives. We argue that their nonfinancial objectives result in diverging levels of diversification and internationalization of business groups across owner types. Specifically, we propose that state‐owned and bank‐owned business groups have a relatively high level of diversification, labor‐owned and mutual‐owned business groups have a relatively moderate level, and family‐owned business groups have a relatively low level. We also argue that state‐owned and labor‐owned business groups have a relatively low level of internationalization, family‐owned business groups have a relatively moderate level, and mutual‐owned and bank‐owned business groups have a relatively high level. We add depth to these ideas by proposing that pro‐market reforms alter owners' ability to achieve their nonfinancial objectives, leading to diverging changes in business groups' diversification and internationalization across owner types. Specifically, we propose that following pro‐market reforms, state‐owned and bank‐owned business groups experience a large decrease in their level of diversification, labor‐owned and mutual‐owned business groups see a moderate decrease, and family‐owned business groups have a small decrease. We also argue that pro‐market reforms lead state‐owned and labor‐owned business groups to have a small increase in their level of internationalization, family‐owned a moderate increase, and mutual‐owned and bank‐owned to experience a large increase. To the business groups literature, we highlight the importance of controlling owners and their nonfinancial objectives as the drivers of business group diversification and internationalization, complementing the usual focus on market imperfections. To agency theory, we highlight the diversity of owners' nonfinancial objectives and explain how these affect strategy, complementing the traditional focus on differences in objectives between owners and professional managers driving strategy. Managers can defend decisions based on the often‐unstated nonfinancial objectives of the controlling owners, countering external investors' criticisms of managers misbehaving by not aiming to maximize profits.
Vehbi Koç was a visionary who began his business career running a single grocery store and went on to build one of the largest conglomerates in the world, comprising 113 companies, 90,000 employees, and 14,000 dealer agencies. These statistics alone represent the monumental accomplishment of Koç’s life and work. His approach was generative and impactful in part because Koç was ahead of his time in conceptualizing and implementing a number of strategies for which successful modern-day businesses are often lauded: human capital development, diversification, sustainability, strategic resource allocation, talent identification and support, collaborative innovation, strategic partnerships, and corporate social responsibility to create and harness social and economic impact. This case study brings Vehbi Koç’s key undertakings to light and reveals how his forward-thinking, innovative strategic legacy continues through the work of the Koç Foundation today. The case study utilizes theories of Human Capital Development, Stakeholder Capitalism, and Corporate Social Responsibility to analyze the work of Koç Foundation in Turkey.
This working paper integrates the role of entrepreneurship and firms into debates on why Asia, Latin America and Africa was slow to catch up with the West following the Industrial Revolution and the advent of modern economic growth. It argues that the currently dominant explanations, which focus on deficient institutions, poor human capital development, geography and culture are important, but not sufficient. This is partly because recent research in business history has shown that several of the arguments are not empirically proved, but especially because the impact of these factors on the creation and performance of innovative business enterprises is not clearly specified. Modern economic growth diffused from its origins in the North Sea region to elsewhere in western and northern Europe, across the Atlantic, and later to Japan, but struggled to get traction elsewhere. The societal and cultural embeddedness of the new technologies posed significant entrepreneurial challenges. The best equipped to overcome these challenges were often entrepreneurs based in minorities who held significant advantages in capital-raising and trust levels. By the interwar years productive modern business enterprise was emerging across the non-Western world. Often local and Western managerial practices were combined to produce hybrid forms of business enterprise. After 1945 many governmental policies designed to facilitate catch-up ended up crippling these emergent business enterprises without putting effective alternatives in place. The second global economy has provided more opportunities for catch up from the Rest, and has seen the rapid growth of globally competitive businesses in Asia, Latin America and Africa. This is explained not only by institutional reforms, but by new ways for business in the Rest to access knowledge and capital, including returning diaspora, business schools and management consultancies. Smarter state capitalism was also a greater source of international competitive advantage than the state intervention often seen in the past.
