Multinational Companies and Host-Country Institutions:a Comparative Case Study of Vocational Education and Training in Turkey
This paper explores the two-way relationship between multinational companies (MNCs) and host-country institutions in terms of skill formation and development. This is done through case studies in two MNCs and one local firm operating in the Turkish automotive industry.
With its dynamic economic development and educated young population, Turkey has become an attractive country for MNCs within the last two decades. Particularly international manufacturing companies have established subsidiaries in Turkey. These firms perceive Turkey as an ideal logistic centre for raw materials, parts and assembly because of its strategic location serving as a bridge between Europe and Asia. However, although Turkey possesses potential advantages, it also faces a shortage of qualified intermediate employees with key skills required by companies. Being aware of the weakness of the vocational education and training system (VET) and its long-term implications for the Turkish economy, the state, in collaboration with educational institutions, employers and trade unions, has recently taken concrete steps to revitalize the system to align with the changing skill demand of employers.
In addition to these efforts by the state, it is crucial to explore how the MNCs concerned respond to these skill issues and may provide solutions. Do they differ from local firms in their approaches? If so, how? These questions can be linked to the literature on MNCs and host country institutions which has analysed the relationship between MNCs and their host country environment, including the main factors influencing this relationship. MNCs need to consider formal and informal regulations of the employment system, the nature of labour market institutions, and dominant management styles of their host countries as they may shape the short-term and long-term employment strategies of MNCs (Edwards and Kuruvilla, 2005). For instance, a dominance of low level job mobility in the host country may encourage MNCs to set long-term employment plans and engage with the host country’s education systems to meet their skill demand. Dominant production system in the host country may also affect decisions of MNCs regarding employment practices. Connected with labour regulations and production system, MNCs need to understand the linkage between labour market and educational institutions and qualification systems of the host country while organizing their work system (Grimshaw et al., 2011). These examples illustrate how the host country environment substantially influences MNCs’ employment practices in that particular country. At the same time, MNCs may also influence and shape the governance of host country institutions under certain conditions. For example, high technological development within the MNCs and the subsequent skill requirements may motivate these MNCs to engage with the VET system and to contribute to higher standards of national skill system.
This paper engages with these issues through two case studies of MNCs’ linkage with their host country institutions in terms of vocational skill formation and development in the Turkish context. This is done through a qualitative analysis of vocational training strategies and practices of one German and one Japanese MNC operating in the Turkish automotive industry. The different national origin of the MNCs will provide further insight to what extent country-of-origin factors may determine the relationship with the host country environment. A third case study of a local firm in the same industry provides a comparison to analyse whether MNCs share the same conditions and opportunities as local firms in term of skill development and engagement with the national VET system. The data were collected through in-depth, semi-structured interviews with HR managers and training specialists in the companies and technical teachers and coordinators in the vocational schools that have direct linkage with the companies in question. Additional interviews were conducted with representatives from employer associations, trade unions, and public institutions involved in vocational education and training in the Turkish automotive industry. This data collection process was supported by secondary data in the form of reports and documents provided by the companies and institutions.
Preliminary findings show that both the German and Japanese MNCs have engaged with the skill formation system in Turkey. However, they follow different paths. The German MNC brings German dual system into Turkey and adapts it to the local context. Within the scope of the dual system, the firm tries to develop strong interaction with the system actors. In other words, it adopts an outward-oriented approach in terms of skill formation and development. The local firm follows a similar path to the German firm as it has established an intense interaction with the system actors. However, there has been no clear evidence showing that the local firm has more opportunities or incentives to engage with the VET system. On the other hand, the Japanese MNC is in limited interaction with the system by fulfilling its legal requirements and providing material support to the schools while following its global corporate standards as a priority. As compared to the other two firms, the Japanese firm can be considered to adopt a relatively more inward-oriented approach. The state’s role in this picture can be said to be more as a controller and monitoring mechanism of the system. But there has been no obvious evidence showing that the state provides additional incentives regarding skill development issues for MNCs operating in the automotive industry. Based on the preliminary findings, it can be inferred that companies operating in different manufacturing industries benefit equally from the incentives.
The study is believed to contribute to the literature by providing further insight in the influence of foreign direct investment on national skill formation system of host countries by connecting firm-level issues with national-level skill systems. Additional contribution to the MNC literature may be through understanding the form and content of the relationship between MNCs and their host country environment, in particular by analysing how this relationship may be shaped by the firm’s country-of-origin. The study also casts light on the current situation of the Turkish automotive industry and national VET system.