An integrated AHP‐TOPSIS framework for foreign direct investment in Turkey

Abstract

AbstractForeign direct investment (FDI) is seen as an essential part of development due to the contribution of the host country. Profits of FDI such as technology transfers, spillover benefits, and increasing competition have encouraged both of domestic firms and policymakers to attracting FDI. In the course of making investment decisions, foreign investors prefer countries that follow stable economic policies, achieve a certain level of development of financial structure, and have legal regulations that favour foreign capital. Turkey, one of the emerging market economies, met the challenges including but not limited to high inflation, diminishing growth rates, and currency depreciation. Even with its ongoing currency crisis, Turkey continues to remain a top pick for investors. From this point of view, this paper investigates the selection of the most suitable sector by taking into consideration the economic, political, and country factors for foreign investors. The proposed methodology for sector selection contains three stages. The criteria for FDI are defined from the current literature, and we narrow it down according to the opinions of the decision‐making group. After that, the analytic hierarchy process method used to obtain the priority order of the criteria. Finally, we use the Technique for Order of Preference by Similarity to Ideal Solution method to rank the sectors in accordance with the evaluation criteria. Additionally, we perform a sensitivity analysis to observe the effects of possible changes in the weights of the criteria. We designate three prime criteria, which are political, economic, and country. The results indicate that political criterion have the highest weight and based on the results of stages, manufacturing sector is obtained as primer election industry.