Incentive Mechanisms in Industrial Development: An Evaluation through Defense and Aviation Industry of Ankara

Abstract

There is an ongoing debate about the dynamics of technological catch-up of domestic firms in an increasingly globalized and uncertain world economy. Incentive mechanisms are one of the routes of these debates. Incentives which are related to the overall market conditions and the structure of competition, as well as government policies guide the allocation of resources and the effort to develop new knowledge. Governments often play an important role as providers of the information and technology sources, establishing or supporting science parks, clusters, coordinating the relationship between industry and university/research institutions, directing financial support to innovative enterprises, promoting exports etc. This paper explores the extent of incentive and support mechanisms which shape government policies and firm strategies in terms of industrial development through the case of defense and aviation industry in Ankara which has a leading role in the development of the sector.The defense and aviation industry is a special sector among others in many respects. The firms in the sector invest heavily in R&D and innovation. The industry is heavily regulated and protected, and public instruments such as R&D procurement and offset agreements are commonly used to support national interests and domestic firms. Through the last 20 years, Turkish defense and aviation industry has determined its direction as meeting its requirements more domestically, having an international regional market and begin to take its place in the global competition. Incentive and support mechanisms are important to ensure the development and sustainability of this uptrend and performance in the following phase. In this respect, this study will examine the related incentive mechanisms by various institutions and the exploitation level of firms. The relation between the incentive exploitation level of the firms and the firm characteristics such as, firm size, age, quality of the labor, innovative capacity and the firm performance such as increase in turnover, exports etc. through firm surveys conducted with defense and aviation companies in Ankara will be evaluated.