The Relationship Between Subsidiary Size and Subsidiary Autonomy in Turkish Outward Foreign Direct Investments

This study investigates the relationship between subsidiary size and subsidiary autonomy in forty-two Turkish companies investing directly in Central Asia, Russia and Balkan countries. Literature exists on the size-autonomy relationship among subsidiary companies in developed economies but little focuses on developing economies. The findings of the study indicate that autonomy levels among subsidiaries of Turkish companies involved in outward d irect investment are similar to those of subsidiaries from developed countries.Experience in the target market significantly affected the autonomy levels of subsidiary companies. The relationship between autonomy and size is differentiated depending on the decisionlevels involved.


Introduction
Following the dissolution of the Soviet Union, many Turkish companies have sought opportunities for d irect investment in the newly formed republics. Direct investments by Turkish co mpanies and indiv idual entrepreneurs usually take place in two forms ofcorporate structure: independent companiesor subsidiary companies managed by a central co mpany. Extensive literature exists on the size-autonomy relat ionship among subsidiary companies in developed economies( [1][2][3][4]). Factors such as international experience, brand and product image, use of technology and managerial information, experience in markets of the chosen country, quality of professional development programs, staff quality and product differentiation and develop ment skills were measured as the starting advantages (ownership) of the firms( [5][6][7][8][9]).
The present study includedforty-twoTurkish companies with interests in seven different countries (Bulgaria, Ro mania, Uzbekistan, Kazakhstan, Turkmen istan, Kyrgyzstan and Russia).This study was conducted with the support of the Scientific Research Co mmission of Marmara University, Turkey. The link between autonomy and size was tested through the quadratic model developed by Hedlund [2], which was subsequently validated by the work of several researchers( [1,3,4]).
The level of co mpany autonomy was tested by comparing the relative influence of the subsidiary or central co mpany usingthirteen factors, and the size of the subsidiary co mpany was defined by the number of workers [1].When explanatory factor analysis is applied to the thirteen autonomy criteria, the results are distributed under three factors. Each factor contains a different level of autonomy. Factors such as international experience, brand and product image, use of technology and managerial informat ion, experience in markets of the chosen country, quality of professional development program, staff quality and product differentiation, and development skills were measured as the starting advantages (Ownership) of the firms( [5][6][7][8][9]). Two of the three motives that Dunning used in his "Eclect ic" approach exist among the investment motives of Turkish firms: seeking markets and seeking resources( [6,7]). The present study uses two groupings since the companies in this region do not have the opportunity to engage in international growth [10] and therefore, seek strategic resources and opportunities to innovate. The results indicate that autonomy is greater among resource-seeking subsidiaries than ma rket-seeking subsidiaries.Theresults are discussed with reference to resource-based theories( [11][12][13]).
Autonomy, as a variable of o rganizat ional structure, has been the focus of many studies within business literature. The determinants of organizational structure form an important axis of business studies. Decisions regarding centralization o r autonomy are tools utilized by co mpanies in order to solve problems or to evoke their sources to achieve their goals in the most effective way. When the goals are in question,it is intended to maximize pro fitability and reduce in Turkish Outward Foreign Direct Investments commercial risks [14]. Business activities conducted overseas involve greater risk because the activities are conducted in a different political and commercial environment fro m those of the home country. Effective management,in this case,is more difficult for the central company. Although the central co mpany may wish to retain control of all decisions, commercial risk perception and the importance of the opportunities utilized by the subsidiary company are considered to determine the subsidiary company's level of autonomy.
The autonomy levels of subsidiary companies have been the focus of studies within the field o f international management since 1980. Prev ious researchers have attempted to define the determinants of subsidiary autonomy levels. Garn ier [14] suggested that risk perception is a significant determinant in the autonomy of corporate subsidiaries and determined the relat ionship between the central and subsidiary company based on three distinct elements [14]. Previous studies have consistently found that the size of the subsidiary company is an important factor in establishing its level of autonomy [12]. So me studies concluded that the growth and conditions of the ho me country of the central company were determinants in subsidiary autonomy [2]. Birkinshaw and Hood [15] claimed that size is just one of the determinants of autonomy. Previous researchers have also studied the competency strategies of subsidiary co mpanies [16] as well as the growth of resources administered and controlled by it [2] and the ways in which init ial advantages affect autonomy [15]. Since business expansion requires the complexcoordination of processes and greater expert knowledge and experience, it may be necessary to have dependence on the central company [1].
The autonomy level of the subsidiary co mpany varies depending on the criteria by which it is measured.Other researchers utilized three, seven, and nine criteria andthey contained differences despite the similarities. Decisions regarding capital expenditure, appoint ment and evaluation of top level executives as well as the development of quality standards and the selection of suppliers do not have the same importance.
This research utilized the results of thirteen criteria based on various types of decisions throughout different areas of the business and autonomy levels. Each decision is individually assessed with regard to strategic, functional and operational areas. The next section presents the methodology and research findings, and section three provides conclusions.

Methodologyand Findings
The modelling framework of th is research consisted of the direct investment of Turkish companies in seven foreign countries. Research samples representing different sectors were d rawn randomly fro m members of the Association of Businessmen and the Co mmerce Office o f Attaché. Surveys were ad ministered in the seven countries with which d irect investments were conducted by the Turkishcompanies.
Data was collected via a questionnaire form with thirteen questions designed to measure the level of dependent degree on the central company. The questionnaire structure was similar to the one used by GlaisterandTatoğlu [17]. In this study, data from forty-two firms that directly invest in the seven countries was collected through surveys and in-depth interviews with the top executives.The population of this study was determined by Turkish Businessman Associations and Turkish trade attaches of each country. Each firm that had more than fifty employees was visited during the research resulting in the sample of forty-two firms.
The survey utilizes a 5-point Likert scale where the lowest level is indicated by 1 and the highest level is indicated by 5. The organizat ional size variable was measured through the number of subsidiary workers. Although this variable was often utilized as a scale variable during the initial phases of the research, it was rep laced with the categorical variable in the later phases.

Fi ndings of Autonomy and Size Relations
Each participating subsidiary company was asked about its dependence on the main co mpany. Since dependence on the main co mpany and autonomy are inversely related, autonomy levels are calculated based on the level of dependence on the main company. Table 1 presents descriptive statistics for the responses to the questions. In these responses, the higher mean values refer to lower autonomy.
After the preparation of data was performed and the descriptive statistics were tabulated, factor analysis was carried out to test the validity of the questionnaire and to determine how many of the thirteen factors could be denoted in establishing a model for the dependence level. Here, each variablerefers to the related question.The results indicated that three different factors contribute to the measured dependence on the main co mpany. These factors are the functional, the strategic,and the operational ones. Table 2 shows the results of the factor analysis.   Since the factors point out the dimensions of the dependence level on the main co mpany, lower values indicate greater autonomy within the subsidiary co mpany.
Following factor analysis, the internal valid ity of the questionnaire was tested via Cronbach's Alpha scores. Factor 1 had a Cronbach's Alpha value of 0.93, Factor 2 had a lower but satisfactory Cronbach's Alpha value of 0.696, and Factor 3 had a high Cronbach's Alpha value of 0.75. These values indicate valid questionnaire performance.
In the next step, various regression models were performed between the size of the subsidiary co mpany and the level of autonomy, but no statistically significant relationship was found. The regression models used each factor as dependent variables and the size of the subsidiary as the independent variable. Neither the linear nor the quadratic models produced significant results. Therefore, it was concluded that the size of the subsidiary co mpany cannot explain the variables which constitute the various dimensions of subsidiary autonomy.
Then, the subsidiary size variable was used as a categorical scale by eliminat ing the problems related to data quality. In this transformation, 1 was used for co mpanies with a maximu m of 200 emp loyees, 2 was used for companies withbetween 201 and 400 emp loyees, and 3 was used for companies with over 400 employees. Table 3 shows the frequency distribution that resulted through the three distinct categories. Once the subsidiary size variab le transformed into a categorical scale, analysis of variance (ANOVA) was condu cted to test whether significant differences existbetween subsidiary co mpanies in d ifferent size categories regarding the autonomy levels. The research hypothesis tested was: H 0 : There are no differences among autonomy levels of three size categories of subsidiary companies Hypothesis testing at three different factors indicated that there were statistically significant differences between the groups which imp ly subsidiary co mpanies in different sizes. Table 4 shows the results of the analysis of variance concerning the three factors. The results indicate that the significance level for factor 1 is 0.000, factor 2 is 0.012, and factor 3 is 0.008. It was observed that there are significant differences among co mpany groups by using ANOVA;however it was important to learn which g roups differed significantly. Therefore, Scheffe statistics were utilized. The results are shown in Table 5.The results indicate a significant difference between category 1 (the smallest size co mpanies) and category 3 (the biggest size co mpanies) at each factor. In other words, the autonomy levels of the small and large scale enterprises differ inversely thus autonomy becomes less as the size of the firm increases. Hence, greater autonomy exists within s mall-scale enterprises than within larger ones.  Table 6 presents the frequency distribution of the subsidiary companies across five different categoriesaccording to their levels of size. The relative frequency of each group would be approximately 0.20 in the case of forming five different groups according to the company sizes from s mall to large scale.Analysis of variance was performed to establish whether there was a difference between the sizes of the companies in terms of autonomy levels (see Table 7).
Table7 shows a significant difference at the level of 0.05 for factors 1 and 3, and at the level of only 0.10 for factor 2 in terms of autonomy levels among the sizes of the subsidiary companies. The significance levels were respectively 0.000 for factor 1, 0.058 fo r factor 2, and0.002 for factor 3.
Scheffe statistics were utilized to determine statistical differences among groups. The fourth group produced significant difference in the measurement of factor 1. The fourth group is significantly different fro m both the first and the second groups. Autonomy is high within small scale enterprises and shows a change similar to the linear decreasing in parallel with the enlargement and raising again at the biggest scale.
The fourth group shows a significant difference in terms of decisions related to the format ion of quality standards and selection of suppliers (factor 3). The second and third groups also show significant differences. The alterat ion dependent on size is similar to factor 1. Similar results were reported in previous studies ([1,2]). It was stated previously that no significant difference was found for factor 2 at the 0.05 confidence level. Factor 2 includes strategic and fundamental decisions and constitutes the decision areas, which are rarely delegated to subsidiaries by the main co mpany. Decisions on capital expenditure, distribution of profits, the appointment and evaluation of top level executives, as well as the hand-over to the subsidiary company of ad min istration and supervision roles are difficu lt decisions to turn over to the subsidiary. Figure 2 shows how much higher the dependence on the center is for this factor than the other factors. Table 8 shows the bipartite mean co mparisons for factors 1 and 3, in which statistically significant differences were identified. The table for factor 2 was not shown here since no significant differences exist. It should be noted that no significant differences were identified between the first group and the fifth group, which means the autonomy levels of the smallest and the largest scale companies are the same.
The same point is seen as a result of the trend section for the five g roups for the average dependency values. Figure 1 shows the changes in factor 1, Figure 2 shows the changes in factor 2 with the same approach, and Figure 3 demonstrates the same for factor 3 as the most appropriate curvilinear trend for the distribution of the data. This appearance testifies that the dependence level of the smallest and the largest scale enterprises are similar. It is necessary to evaluate the relationships presented in the threefigures in terms of co mpatibility and significance. The R-square values (0.245, 0.172 and 0.094) indicate that the fit of the curve with the data are relatively poor. The significance levels are 0.004, 0.025 and 0.147 respectively. In that case, the relationships observed for factors 1 and 2 are weak but statistically significant; those of factor 3 are both weak and statistically insignificant.

The Relati on of the Destination Ai m with the Level of the Dependence
Among the investment motives of Turkish firms, it is possible to find two of the three motives that Dunning used in h is "Eclectic" approach: investing to seek markets and to seek resources( [6,7]). These two groupings are used in the present study.
Differences were observed as a result of the classification performed according to the variable "the effect of the market size of the country, as a market-seeking motive in the investment decision",which was the primary reason for establishing the subsidiary company. Similarly, the level of dependence differentiated in the classification conducted according to the effect of the variable "the facility of the access to the neighboring markets as a resource-seeking motive in the investment decision". An independent sampling T test was utilized to test for significant differences for both variables for the subsidiary co mpanies classified in these two groups. The results are presented in Tables9 and 10.
A statistically significant difference was found at the 0.05 confidence level for factor 1, in terms of dependence, between the companies targeting market growth of the destination country and the others. The significance level was 0.006. No statistically significant difference was found at the 0.05 confidence level for factor 2, in terms of dependence, between the companies targeting the market growth of the destination country and the others. The significance level was 0.757.No statistically significant difference was found at the 0.05 confidence level for factor 3, in terms of dependence, between the companies targeting the market gro wth of the destination country and the others. The significance level was 0.121.
No statistically significant difference was found at the 0.05 confidence level for factor 1, in terms of dependence, between the companies targeting the resources of the destination country and the others. The significance level was 0.867.There was a statistically significant difference at the 0.05 confidence level for factor 2, in terms of dependence, between the companies targeting the resources of the destination country and the others. The significance level was 0.027. No statistically significant difference was found at the 0.05 confidence level for factor 3, in terms of dependence, between the companies targeting the resources of the destination country and the others. The significance level was 0.864.

Relationship between Ownershi p Advantage and Autonomy
Based on self-identification in the survey, it is observed that the experienced firm groups' average value of the independence on the main co mpany in the destination country is higher than that of the relatively inexperienced firm groups. A T test of independent samples was conducted to establish whether this difference was statistically significant at the 0.05 confidence level.
Factor 1 shows differences in terms of experience in the destination country. The significance level of the difference was 0.027 between the company groups that were experienced and those that were inexperienced. Factor 2 shows differences in terms of experience in the destination country. The significance level for factor 2 was 0.008 between the experienced groups and inexperienced groups in the destination country. Factor 3 shows differences in terms of experience in the destination country. The significance level for factor 3 was 0.031 between the experienced groups and inexperienced groups in the destination country. No significant difference was observed in terms of the other starting advantages of the ownership.

Conclusions
The findings of the present study indicate that autonomy levels among subsidiaries of Turkish companies involved in outward direct investment are very similar to those of subsidiaries fro m developed countries. Findings also show that experience in the target market significantly affected the autonomy levels of subsidiary co mpanies. The relationship between autonomy levels and size of Tu rkish companies is differentiated by their decision areas. In the area of strategic decisions, all strategic decisions measured remain within the control of the main co mpany when the scale augments widely and the main co mpany is highly effective independent of the size of the operations for all decision areas. Decisions concerning the designation of quality standards and selection of suppliers are taken with higher autonomy for subsidiaries and with lower autonomy for the main co mpany within small scale subsidiary companies. The control of the main co mpany increases in parallel with the augmentation of the scale and decreases the autonomy of the subsidiary company. The autonomy of subsidiaries declines with increasing organizat ional scale within larger-scale organizations.The main co mpany retains a greater level of central control, thereby reducing the autonomy of the subsidiary. In terms of the decisions concerning the determination of polit ics belonging to the functional area, the control of the higher autonomy is in question for the small scale subsidiary co mpanies and the control of the ma in company is lowest for large scale organizations. In terms of factors 1 and 2, when the five size categories are examined, the findings indicate that there is no difference in levels of autonomy between the smallest to the largest scale companies. The resultsprove that a compatib le consequence with the quadratic modelling has derived.
In cases where there is an experienced main co mpany, central organizat ion in the chosen country's markets, in terms of the relation between scale and autonomy, it was found that the control of the main company is higher wh ile that of the subsidiary is lo wer.The autonomy level of subsidiaries, whose firms take market growth as the basis for the selection of countries, is higher in the area of functional decisions. A significant difference was found in terms of the strategic decisions concerning the autonomy of subsidiaries of firms seeking resources within the chosen country, with greater decision-making retained at the main co mpany.
This research adds to the existing body of knowledge for developed and less developed economies by providing statistical insights on the impact of size and autonomy as related to outbound direct foreign investments. The results enhance understanding of these factors as related to both the motives of market expansion and resource utilizat ion. Managers engaged in less developed economy countries will find decision processesin tandem with processes commonly understood in developed economies. Findingco mmon mindsets in the complex world of international business is advantageous to global managers everywhere.
This study analyzed i) where major decisions are made, ii) which decisions are made in the subsidiaries and iii) how differences in organizational cultures may affect decisions. Differences in organizational cultures are not analyzed statistically due to the difficu lty in measuring organizat ional cultures. The results of this study show that i) strategic decisions are more likely made at the ma inco mpanies, ii) as the ma inco mpany size increases functional and operational decisions are more likely made at the subsidiaries.This study's findings indicate that it would be difficu lt to draw conclusions about the relationships between subsidiary size and subsidiary autonomy without initially classifying decision areas as strategic, functional and operational. This study can be extended further to find out if differences in organizational cu ltures would affect the relat ionships between subsidiary sizes and subsidiary autonomies.