Chapter One Introduction
Background
When the financial crisis hit the United States (U.S.), other developed countries were also affected, including Japan and the United Kingdom (UK), which catapulted the global financial crisis. Since many developing countries export to and do business with these affected nations, their economies were adversely impacted, as well (Humala 2009). One of these distressed economies is the Turkish economy, which is still recovering from the market problems that occurred in 2001, due to the terrorist actions in the U.S. (Daloglu 2008). The Turkish Justice and Development Party (AKP)-led government created a stimulus package, made mostly of temporary indirect tax cuts, to advance the economy and it also obtained financial aid from the International Monetary Fund (IMF) (Economist Intelligence Unit 2009, p.3). On the other hand, the Central Bank of Turkey decreased its overnight borrowing rate much more swiftly than formerly anticipated, from 16.75 in October 2008 to 10.5 in March 2009, the lowest level after the 2001 financial crisis (Economist Intelligence Unit 2009, p.7). These efforts, however, could not contain the impact of global competition that exerts its burden on the Turkish economy and the increasingly competitive global textile industry (Tatoglu Demirbag 2008).
1.2 Problem definition
Despite these monetary and fiscal policies, the Turkish economy continued to contract from 2007 to 2009. In 2008, real Gross Domestic Product (GDP) growth decreased from 4.82 in 2007 to 1.12 in 2008 (Euromonitor 2009). By 2009, real GDP growth became -6.50 (Euromonitor 2009). The textile industry also plummeted, as industrial production diminished by 21 in total (Economist Intelligence Unit 2009, p.17). The Turkish textile industry is critical to the economy of Turkey, because textile companies composes 18 of the total companies in Turkey and annual production value of the sector is 30 billion USD (Parlak et al. 2009, p.184). The Turkish textile sector is also the 5th largest supplier in the world and 2nd largest supplier to European Union (Parlak et al. 2009, p.184). If the Turkish textile sector significantly contracts, this will greatly negatively impact the economy. To compound these problems, Turkey battles political issues, as part of its military-led historical development into a republic, and it also has issues regarding its EU accession and IMF grants (Abramowitz Barkey 2009 Birch 2009 Economist Intelligence Unit 2009). These political concerns complicate the impacts of the global financial crisis. There is a need for further examination, on how the Turkish government and private sector, and even regional organisations, can work together in finding immediate and long-term solutions to the weakening Turkey economy and textile industry.
Research aims and objectives
This dissertation aims to identify the effects of the 2008 global financial crisis on Turkey and the Turkish textile industry, in particular. The research aims and objectives are the following.
1.4 Chapter summaries
This dissertation begins with the review of literature. The literature review includes an exploration of the four management models- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility, and how they can undermine or reinforce the impacts of the 2008 global recession. It is followed by the chapters on results and discussion. The results chapter compiles the results of secondary research. The discussion section explores the answers to the research aims. The final chapter consists of the conclusion and the recommendations. The conclusion summarises findings and links results with the conceptual models in the review of literature. The recommendations are for the government and textile firms, so that they can collaborate with each other in forming a more competitive industrial and national performance.
Chapter Two Literature review
2.1 Introduction
This literature review discusses the concepts that are involved in the four management models that will be used for this paper- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility. The review of literature indicates the importance of knowledge management, business responsibility, and innovation to the competitiveness of firms and the Turkish economy, as a whole, wherein if they contribute to the competitiveness of the Turkish industries, this can decrease the impact of the 2008 global financial crisis. There is, nonetheless, a gap in understanding the competitiveness of the Turkish industry with respect to other nations, which this paper can no longer cover.
2.2 Impacts of the 2008 global financial crisis
The 2008 global financial crisis demonstrated how developing economies have been increasingly dependent on the economies of First World countries, for imports, exports, and how they are deeply interconnected through the channels of interest rate and exchange rate (Subrahmanyam 2009, pp.36-37). The Turkish economy decreased by 6.2 in the fourth quarter of 2008, which cut GDP growth to only 1.1 for the whole 2008 (Economist Intelligence Unit 2009, p.8). See Figure 1. The negative GDP continued in 2009, with negative growth rate, -5.90. The constrained domestic bank lending, inadequate foreign capital inflows and frail external demand contributed to the economy contraction from 2008 to 2009. In 2010, an economic think-thank predicted that GDP growth will improve to a modest 1, but this will rely on the incremental improvements of the credit conditions and a more secure exchange rate (Economist Intelligence Unit 2009, p.8). Demand in Turkeys primary European export markets is still forecasted to remain frail in 2010, because of the 2008 global financial crisis that has affected global exports industries across Europe and the rest of the world (Economist Intelligence Unit 2009, p.8).
Figure 1 Gross domestic product by expenditure
(TL m at constant 1998 prices where series are indicated otherwise change year on year)
Figure 1 also shows drops in private consumption from 2008 to 2010. Public consumption also decreased from 2008 to 2009, and so total domestic demand sharply drops for the same timeframe (Economist Intelligence Unit 2009, p.8). Export expenditures drop from 2007 to 2008, although a larger fall is seen from 2008 to 2009 (Economist Intelligence Unit 2009, p.8). The impacts of the 2008 global financial crisis are evidently extended to 2010, with 2010 expenditures not showing the same figures as 2007.
Because of the abrupt economic slowdown in Turkey and decreases in international commodity prices, inflation reached 10.43 in 2008, compared to 8.78 in 2007 (Economist Intelligence Unit 2009, p.8). Inflation rate decreased, however, in 2009, at 6.28 due to the inflationary effects of the sharp slide in the value of the lira since early October 2008 (Economist Intelligence Unit 2009, p.8).
The high increase in risk aversion that came with the 2008 global credit crisis in September-October 2008 pushed the Turkish lira to depreciate from an average of TL1.24US1 (TL1.78 1) in September to about TL1.70US1 (TL2.10 1) in late October (Economist Intelligence Unit 2009, p.9). The price volatility in 2009 depreciated lira further to YL 1.56.
Low import demand and lower commodity prices lessened the Turkey s current-account deficit from about US42bn, or 5.7 of GDP, in 2008 to about 67 in 2009. The smaller deficit in 2009-10 should help to decrease the burdens of external financing pressure as the global credit problems made it harder to promote international financing than before the global financial crisis in 2008 (Economist Intelligence Unit 2009, p.10). Hence, it can be seen that the economy of Turkey has been affected by the 2008 crisis, through a direct impact on the GDP, lira value, inflation rate, and public and private expenditure.
2.3 Relationship between Knowledge management and the 2008 Global financial crisis
This sub-section discusses the knowledge management model, beginning with the conceptualization of knowledge, and then followed by the exploration of its internal processes and external advantages. It also links knowledge management with dealing with the 2008 global financial crisis
2.3.1 Knowledge
Few firms understand and invest in knowledge management, especially when they do not value human resources as sources of distinct knowledge. Those who do employ knowledge management can improve and have improved their competitiveness in this information-driven society (Hansen et al., 1999 Nayir Uzuncarsili 2008, p.142 See Appendix A). Davenport and Prusak (1998) explain knowledge as a fluid mix of framed experience, important values, contextual information, and expert insight that provides a framework for evaluation and incorporation of new experiences and information (cited in Danskin et al. 2005, p.92). Polanyi (1966) highlights the definition of knowledge as the blood for effective action.
It is often heard from companies that their employees are one of their greatest assets, because of the knowledge they bring to the organisations (Crook et al. 2008 Halley Beaulieu 2005). Several scholars attest that knowledge exceeds in importance, compared to other physical properties (Spender 1996 Grant and Baden-Fuller 1995 Grant 1997, cited in Nayir Uzuncarsili 2008, p.142), including natural resources and finance (Quinn et al. 1996 Martinez 1998 Numri 1998, cited in Nayir Uzuncarsili 2008, p.142). It is because finance and natural resources can be accessed by anyone, but valuable knowledge can be limited to organisations and its people (Guillot Lincoln 2005).
2.3.2 Knowledge and the 2007 global financial crisis
Knowledge can be seen as strategic source of competitiveness, which can reduce the impact of the 2008 global financial crisis. Though there are no existing studies that makes this direct link, Piggott (2008) indicated that the strength of Turkish financial sector came from the strong government reforms made after Turkeys catastrophic banking failure of 2001. This reaction to the 2001 financial crisis is considered as a form of knowledge, which strengthened the banking sector when the 2008 global financial crisis hit Turkey. Piggott (2008) highlights that The wisdom of government regulations that were once deemed overly strict is now apparent. While international banks are struggling to keep regulatory capital ratios above the 8 minimum, the Turkish banking sector has an enviable capital adequacy ratio of 17. Because of the knowledge gained from the previous crisis, the banking sectors stringent policies enabled it to be financially prepared, because it has high banking assets
2.3.3 Knowledge management and internal processes
The value of developing knowledge within the firm relies on the organisations ability to scrutinise and take up newly made knowledge from numerous sources and then to incorporate this knowledge into its present knowledge base (Cohen Levinthal 1990 Hamel 1991, cited in Danskin et al. 2005, p.93). Hence, companies must organise and administer existing knowledge. This can be referred as managing organisational memory, wherein the latter is described as the the means by which knowledge from the past is brought to bear on present activities, thus resulting in higher or lower levels of organisational effectiveness (Stein 1995, cited in Danskin et al. 2005, p.93).
Given these advantages of knowledge management, this section proceeds to a knowledge management model. Danskin et al. (2005) present a proactive knowledge management model that do not only cut costs and cycle time, but also develops knowledge for predictive management purposes (p.96). See Figure 2. It can be seen from this figure that the knowledge management interconnects the whole value chain stakeholders, so that the company can choose from the firm strategy of cost leadership or differentiation leadership. This model will be useful in analysing the Turkish economy and the textile industry and providing theoretically sound recommendations.
Figure 2 Knowledge management model
Source Danskin et al. (2005, p.96)
2.4 Analytical Hierarchy Process (AHP)
2.4.1 Porters diamond of competitive advantage
In order to understand the Analytical Hierarchy Process (AHP), Porters diamond of competitive advantage must also be discussed. Porters model provides the theoretical basis for the AHP (Danskin et al. 2005, p.97 Shafaei 2009). Porters (1980) generic business strategies are commonly used frameworks for determining channels to competitive advantage within an industry. Two such strategies are applicable to the apparel and textile industry 1) A cost leadership strategy, wherein the firm concentrates on factors that allows it to complete and uphold low per unit costs and 2) A differentiation strategy, which requires making a different image or value for a product or service, whether they are true or imagined (Danskin et al. 2005, p.97). In addition, the review of literature shows that the Porters framework of generic strategies provides the insight that the American textile and apparel industry pursues one of these differentiation strategies 1) Market-based differentiation where an organisation seeks to set itself apart from the competition primarily through product positioning or 2) Innovation-based differentiation where the organisation attempts to differentiate itself through innovative application of technology to meet customer needs (Danskin et al. 2005, p.97). The first mode is more common in the U.S., but not in the Turkish textile industry that has weak innovation and technology in textile compared to other countries (Economist Intelligence Unit 2009).
2.4.2 Analytical Hierarchy Process (AHP)
The Analytical Hierarchy Process (AHP) is first used by Saaty (1980), which concerns structuring multiple-choice criteria into a hierarchy, assessing the relative importance of these criteria, comparing alternatives for each and determining an overall ranking of the alternatives (Shafaei 2009, p.24). Based on this study, the weaknesses of the AHP are the ratings of the constitutive element for each index, which rely on the subjective beliefs of experts (Shafaei 2009, p.24). In addition, the interviewees are presumed to have the same level of confidence for all the pair wise comparison (Zahedi 1996 Yang Lee 1997, cited in Shafaei 2009, p.24). This means that the effectiveness of AHP relies on the constancy of the data gathered from experts on pair wise comparisons of the criteria (Shafaei 2009, p.24). Sirikrai and Tang (2005) also used an AHP-based model to investigate the degrees of significance of indicators of industrial competition (cited in Shafaei 2009, p.24). The results show that AHP can be used to assess the competitive performance of competing companies. Chang et al. (2006) expanded a hierarchical arrangement for identifying the factors that shape the competitiveness of a firm (cited in Shafaei 2009, p.24). These factors are connected to the sources of competitiveness for the Porters diamond of competitive advantage. Their findings showed that AHP can be used as a valid approach for evaluating the competitiveness of firms and they also named weaknesses that Saaty (1980) also noted. The importance of these articles is that they applied AHP for competitiveness assessment and they also identified the weaknesses of the model.
2.5 Innovation ecology
Competitiveness can also be derived from innovation, as many firms can show. This sub-section discusses innovation as a concept and components of innovation ecology.
2.5.1 Innovation
Innovation is defined as
the ability to develop products to meet the needs of market, 2) the ability to use existing technology to develop products, 3) the ability to develop new products or update existing products to meet the needs of markets, and 4) the ability to acquire new technology to create new opportunities. (Liao et al. 2009, p.161).
This definition covers the customer-centricity of innovation, as well as the abilities and resources needed to create new products. Liao et al. (2009) studied the link between innovation and knowledge management, and they concluded that knowledge acquisition is positively related to innovation capability.
2.5.2 Components of innovation ecology
Mark Stefik, Research Fellow and Manager of the Information Sciences and Technologies Laboratory at the Palo Alto Research Center in California said We live and work in . . . an innovation ecology, a collection of people and organisations whose joint contributions make breakthroughs possible. It includes universities, government funders, venture capitalists, designers, marketing departments, and corporate labs. The challenge is to bring ideas together. Studies described innovation ecology as an environment comprising interconnected institutions, laws, and policies that create an innovation infrastructure that includes education, research, tax policy, and protection of intellectual capital.
2.5.3 Innovation and the 2008 global financial crisis
Innovation can also undermine the negative economic impacts of the 2008 global financial crisis. Kocak and Zeytinli (2009) stressed the importance of technological goods and development for welfare nations like Turkey. Though it does not make the concrete connection between innovation and the 2008 global financial crisis, this article indicates that technological goods and development during economic difficulties can greatly improve the economic conditions of Turkey, even as the 2008 global financial crisis affects it.
2.6 Business responsibility at macro and micro levels
This sub-section discusses corporate social responsibility and national responsibility. It also makes connections between competitiveness and business responsibility.
2.6.1 Corporate social responsibility (CSR)
Corporate Social Responsibility (CSR) describes business practices that adhere to ethical values that comply with legal requirements, that demonstrate respect for individuals, and that promote the betterment of the community at large and the environment (Herciu Ogrean 2008, p.1232 See Appendix B). It involves managing business through policies, systems, and practices that meets or exceeds the ethical, legal and public expectations that society has of business (Greenberg Baron 2008, cited in Herciu Ogrean 2008, p.1232). CSR links business competitiveness and stakeholder needs in order to promote holistic solutions (Jones et al., 2007 Sachs et al. 2006). See Figure 3. This figure shows that business principles, key performance indicators (KPI) and CSR projects must be aligned. See also Appendix B which compares CSR models. These articles show that CSR can be linked to competitiveness, which can be resistant to poor economic conditions, or improve chances of better performance, once the economy recovers.
2.6.2 Business responsibility and the 2008 global financial crisis
Hortacsu and Ozkan Gunay (2008) stressed from their study that ethical behaviour is crucial to the proper functioning of the banking sector. Ethical behaviour considers diverse stakeholders, which can improve the competitiveness of the banking sector. When there are problems with ethics, on the other hand, there will be more problems during the financial crisis, because of litigation problems.
Figure 3 CSR and stakeholders perspective
Source Sachs et al. (2006, p.507)
2.6.3 National responsibility
There is a connection between national performance and competitiveness of firms, and this can be within the context of CSR (Herciu Ogrean 2008, p.1233). Chan and Al-Hawamdeh (2002) studied the position of Singaporean government in expanding e-commerce and the impact of e-commerce on the Singaporean society. The Singaporean government conducted projects to make its country the next information and knowledge gateway (Chan Al-Hawamdeh 2002, p.279). Because of these government projects, many small, medium, and large companies have employed e-commerce to maintain or even become important parts of their operations (Chan Al-Hawamdeh 2002, p.284 Molla Licker 2005, p.104). These articles show the link between national responsibility and competitiveness.
2.6.4 Competitiveness and responsibility during the 2008 global financial crisis
Herciu and Ogrean (2008) studied CSR at macro and micro levels. Findings showed that Even if national performance increases, the firm does not succeed to maintain itself to a specific level but on the contrary the firms global performance decreases (p.1242). These results contradict the general findings of ). Chan and Al-Hawamdeh (2002) and Molla and Licker (2005). Nonetheless, Herciu and Ogrean (2008) indicate that it is also important for companies to practice CSR, even when the country lacks the same responsibility platform. Business responsibility helped the financial sector weather the 2008 global financial crisis, because of the readiness to extend stricter policies.
Chapter Three Research methods
3.1 Research design
This section discusses the research design of this dissertation.
3.1.1 Secondary research
This dissertation involves secondary research. It synthesises the works of articles, books, and newspapers on Turkish economy and textile sector. Secondary research is preferred over primary research, because there is already a great deal of information about the Turkish economy and its textile industry, and it will be more meaningful for this paper to synthesise findings and analyse them according to four theoretical models.
3.1.2 Qualitative versus quantitative research
This research combines qualitative and quantitative research designs, because it uses statistics done by other studies, as well as in-depth information conducted by qualitative articles. The triangulation of the research design can improve the validity of the data, because of the combination of in-depth and statistical measures that can help this paper attain its research objectives. Fielding and Schreier (2001) discuss the relevance of triangulation to research. An article provides a good understanding of triangulation
What is involved in triangulation is not the combination of different kinds of data per se, but rather an attempt to relate different sorts of data in such a way as to counteract various possible threats to the validity of (their) analysis (Hammersley Atkinson 1983, p.199, cited in Fielding Schreier 2001, online).
Triangulating data collection methods and analysis involves multiple methods and theoretical frameworks, which help lessen the weaknesses in validity and reliability of using only either a quantitative or a qualitative research design (Fielding Schreier 2001). In other words, this dissertation does not only ask how the textile economy is affected, but how workers also lived through this experience, which qualitative research can also answer (Newman Benz, 1998, p.14).
In addition, a strong value of triangulation is not that it promises the validity of conclusions, but because it provokes in researchers a more critical, even sceptical, stance towards their data (Fielding Schreier 2001). Qualitative research is often criticised as providing benign conclusions that are based on common sense. It is also criticised as lacking empirical basis, because it cannot generalise from present theories (Thitart 2001, p.80). Quantitative research, on the other hand, is grounded on the positivist paradigm (Thitart 2001, p.81). It can be less inflexible than the qualitative research design, especially as emerging information is gathered. Through triangulation, however, analyses are questioned, and the proneness to ethnographic authority is decreased (Hammersley Atkinson 1983, cited in Fielding Schreier 2001), wherein the qualitative researchers can only defend their findings, because they were there.
Triangulation, on the contrary, allows qualitative work to guide quantitative research in developing a theoretical framework, validating survey data, interpreting statistical findings and improving the analysis of sophisticated responses, choosing survey items to construct indices, and providing case study examples (Fielding Schreier 2001 Thitart 2001, p.81). In some cases, the theoretical system can be derived also from experiences of involved stakeholders. For Sieber (1979), quantitative data can be employed to determine individuals for qualitative study and to demarcate representative and non-representative conditions and participants (cited in Fielding Schreier 2001). Sieber adds that in terms of data analysis, quantitative data can mitigate the holistic fallacy that all dimensions of a situation are congruent, and can show how some situations can also be general (cited in Fielding Schreier 2001). Quantitative data cover wide ranges of nuances that qualitative data can also miss (Newman Benz, 1998, p.13 Thitart 2001, p.81).
In triangulation, data is connected from different sources, which is aligned with relativistic epistemology, one that acknowledges the value of knowledge from numerous sources, rather than to focus only on one source of knowledge and take that source as the ideal or best sour (Fielding Schreier 2001). Triangulation allows for continuous data analysis process, creating fewer constraints on data interpretation and provides more leeway of seeing information from diverse theoretical lenses (Groeben Rustemeyer 1994). These are the justifications for the research design used.
3.2 Potential alternatives
The potential alternatives to the triangulation method are using either a qualitative method or a quantitative method. For the qualitative research method, the researcher could have chosen to conduct interviews with textile company managers and human resource (HR) staff, in order to understand the organisational effects of the 2008 global financial crisis. The disadvantage of this approach, however, is that it cannot capture the whole picture. The advantages are the dearth of details in what is the lived experienced of affected stakeholders (Newman Benz, 1998, p.13). On the other hand, the researcher of this dissertation can also conduct a quantitative research, by studying economic indicators. The advantages of this approach are that it illuminates the economic changes before, during, and after the 2008 global financial crisis and it capture statistical trends. The limitations of the quantitative research, nonetheless, are the lack of understanding the deepness and nuances of the impacts of the 2008 global financial crisis, if the study is limited only to interpreting hard facts. Thus, it is more important to combine qualitative and quantitative methods for this research, so that there will be an in-depth look into the experiences of the textile industry during the 2008 global financial crisis.
3.3 Data analysis
For data analysis, findings are categorised according to their connection to the research aims. Furthermore, the data is also analysed using four management models- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility. The analysis is verified through additional multi-rating system from colleagues, which also read the manuscript and provided additional insights.
3.4 Validity and reliability
The concurrent validity of this research is tested and improved through using other researches. All the findings depend on the corroboration of data from different sources. Content validity of this research is improved by using triangulation. This should help enhance the inclusion of all content of the constructs being studied, wherein the constructs are the competitiveness of the national economy and textile industry, as well as the importance of innovation and business responsibility to advancing competitiveness. The constructs have relatively weak predictive validity, because it is possible that other raters would interpret the findings in different ways, especially if they believe that other theoretical frameworks are more suitable for this research. Test-Retest reliability can be improved by providing the criteria of analysis and data collection. Nonetheless, the qualitative aspect of the dissertation can yield diverse interpretations. Parallel forms of reliability are improved through a pre-analysis and post-analysis, wherein post-analysis included feedback from doctorate colleagues. Through this approach, it is also possible to have a good measure of inter-rater reliability.
3.5 Research method limitations
Other articles are rejected because they lack relevance and because of lack of space needed to discuss them more for this paper. This can affect the validity of the study, in terms of representing a wide range of theories in economic and industry development. This dissertation is also limited by not using statistical analysis that can provide reinforcing or even counter-analysis, when interpreting the data.
3.6 Research ethical issues
Ethical issues consider mores and issues when conducting research. Unethical and ethical behaviour, however, can vary across cultures. For the Turkish government, it is not considered ethical to speak strongly against it, and some of the political analyses of this dissertation can serve as an affront to them. However, it must be highlighted that there is no intention to malign the Turkish government (Lancaster, G 2005, p.33). Instead, this work aims to help the government identify some systemic problems that must also be resolved, in order to advance a sustainable socio-economic development for the country. The data collected came from public resources, so there should be no access ethical issues in this regard. All possible permissions are also taken, and the writing of the dissertation is carefully done to cite every idea, data, and information that does not come personally from the author of this dissertation.
Chapter Four Results
4.1 Introduction
The 1990s were a poor economic decade for Turkey and government failed to pursue more progressive economic reforms. The 200001 crisis, however, created the motivation to change the governance structures of the economy, through the establishment of the independence of the Central Bank, the modernisation of agricultural support policies, the fortification of banking regulation, the enhancement of powers of regulatory authorities and the creation of new regulatory bodies (Euromoney 2009). In addition, the loans from the International Monetary Fund (IMF) also helped support the economy during the global financial crisis (Economist Intelligence Unit 2009, p.3). This section discusses the impacts of the 2008 global financial crisis on the Turkish economy and the textile industry.
4.2 Turkish economy
The review of literature showed that the 2008 global financial crisis resulted to the contraction of the Turkish economy from 2007 to 2008, which worsened from 2008 to 2009. Low import demand and lower commodity prices lessened the Turkeys current-account deficit from about US42bn, or 5.7 of GDP, in 2008 to about 67 in 2009. The smaller deficit in 2009-10 should help to decrease the burdens of external financing pressure as the global credit problems made it harder to promote international financing than before the global financial crisis in 2008 (Economist Intelligence Unit 2009, p.10). Hence, it can be seen that the economy of Turkey has been affected by the 2008 crisis, through a direct impact on the GDP, lira value, inflation rate, and public and private expenditure.
Hence, the Turkish economy is not completely unscathed. Turkeys economy slowed down since 2006, primarily because of burgeoning deficits, external debt and deflating export demand (Datamonitor 2009, p.16). GDP growth decreased to 4.6 during 2007 and diminished further by 1.1 in 2008 (Datamonitor 2009, p.16). Weak domestic bank lending, inadequate foreign capital inflows and feeble external demand also took place since the 2008 financial crisis (Datamonitor 2009, p.16). The Turkish Lira also depreciated further, which resulted to losses in investment and investor confidence (Datamonitor 2009, p.16). Not surprisingly, the unemployment rate increased to 13.6 per cent in January 2009 from 10.3 per cent in September 2008, whereby 811,000 people became unemployed (TSI 2009, cited in Bakir 2009, p.74).
The global financial crisis in 2008 decreased external demand and led to 8.2 contraction in exports of goods and services in the fourth quarter of 2008, the first contraction in almost seven years (Economist Intelligence Unit 2009, p.16). The steep recession in domestic demand pushed imports to plummet by 23 year on year in the final quarter of 2008, after a 2.8 reduction in the third quarter (Economist Intelligence Unit 2009, p.16). On the supply side, the biggest slowdowns were made by the wholesale and retail sector and the construction and manufacturing industries, where value-added output decreased by 15.4, 13.4 and 10.8, in that order (Economist Intelligence Unit 2009, p.16). High interest rates limited the manufacturers plans to improve production capacity because of the high cost of borrowing, while this also cust domestic demand and international competitiveness by limiting foreign investors and which also drives the value of the lira (Birch 2009, p.165).
Production of capital goods was the most affected, after plummeting to 44.6, which resulted to the stoppage of numerous fixed investments (Economist Intelligence Unit 2009, p.17). Production of intermediate goods decreased by 24, while the production of durable consumer goods lessened by 25.4 (Economist Intelligence Unit 2009, p.17). Output of non-durable consumer goods also decreased 10.1, and output of energy fell by 6.4 (Economist Intelligence Unit 2009, p.17). Sector-by-sector statistics demonstrated that the mining production plummeted by 3.8, output of electricity, gas and water fell by 6, and the output of manufacturing industry, which makes the majority of the industrial production, decreasing by 24.2 (Economist Intelligence Unit 2009, p.17). For the sectors of the manufacturing industry, only food and tobacco products attained a year-on-year increase in output, although the rise is very little, at 1 and 0.7, respectively (Economist Intelligence Unit 2009, p.17). Production of automotives and parts decreased by 60.3, the biggest drop for more than 14 years, and output for radio, television and telecommunications equipment also decelerated by 55.7 (Economist Intelligence Unit 2009, p.17). These figures showed the general decline of the economy, as a result of the 2008 global financial crisis.
Turkeys economy has, nevertheless, weathered the 2008 global financial crisis better than other nations, because it has benefited from prudent fiscal and monetary policies (Datamonitor 2009, p.15).The government wanted to control fiscal policies through the cuts in the expenditure on public infrastructure development (Datamonitor 2009, p.15). In addition, it also increased prime lending rates for commercial banks to remove excess liquidity from the market (Datamonitor 2009, p.15). Inflation in Turkey decreased, as private investments have improved, since 2003 (Datamonitor 2009, p.15). The inflation rate of Turkey lessened from 25.3 in 2003 to 10.9 in 2008, which stayed in single digits in 2006, even as the Turkish lira depreciated (Datamonitor 2009, p.15).
4.3 EU neighbourhood and Turkish textile
One of the affected industrial sectors of Turkey is the Turkish textile sector. Output from textiles, which is a huge export sector, plummeted by 28.3 in 2008 (Economist Intelligence Unit 2009, p.17). Some sources say that this can be more attributed to the global competition than the 2008 financial crisis With the opening of both the EU and Turkish markets to Chinese exports, tough price competition from China has had negative effects on Turkeys textile and apparel industries (Cotton Incorporated Supply Chain 2008, p.1). The Turkish Statistical Institute reported that Turkey remains a robust net exporter of apparel, with estimated 13.4 billion in exports and 1.3 billion in imports for 2008 (Cotton Incorporated Supply Chain 2008, p.1). One source even reported textile companies that increased revenues, because of their competitiveness in servicing customers and providing high-quality products (Reed Kara 2009). These textile firms rode the crisis better, because of combination of cutting prices, layoffs, and improving the value of their products (Reed Kara 2009).
The textile imports are eating up export gains, however. From 2007 to 2008, exports were increased somewhat by 6.1, while imports increased greatly by 53.9 (Cotton Incorporated Supply Chain 2008, p.1). In addition, Turkeys apparel production decreased by 16.9 from 2007 to 2008 (Cotton Incorporated Supply Chain 2008, p.1). The rise in Turkeys imports came from Chinese apparel. From January through September 2007, in comparison to the same duration in 2008, imports from China increased by 60.3 in knit apparel and 48.9 in woven apparel (Cotton Incorporated Supply Chain 2008, p.1). China is the biggest foreign supplier of apparel to Turkey, making up 14.9 of Turkeys overall knit apparel imports and 18.4 of its total woven apparel imports in 2008 (Cotton Incorporated Supply Chain 2008, p.2). This can be due to the slump in the economy that can also motivate buyers to buy cheaper apparel from China.
Chinese textile and apparel shipments to Europe also greatly increased (Curran 2009, p.306). For the first ten months of 2008, the EU imported more from China (an increase of 38.54) than any other region of the world (Cotton Incorporated Supply Chain 2008, p.2). As the global financial crisis affected other EU textile industries total Chinese textile and apparel exports were up 8.43 for the ten-month period (Cotton Incorporated Supply Chain 2008, p.2). Hence, as other textile industries contracted, Chinese textile increased even more during the 2008 global financial crisis. This shows how low cost strategy worked for the Chinese sector, while the Turkish textile industry suffers from the competition from China in its own country and with dealings with other EU member, as well.
4.3.1 Knowledge management model and the 2008 global financial crisis
How did the knowledge management of the government interplay with the 2008 global financial crisis In terms of the knowledge management of the Turkish government, there are efforts to improve the rate of innovations and inventions, although there is no policy or general framework that promotes knowledge management as a whole and for the textile industry in particular (Datamonitor 2009, p.2). Articles from Reed Kara (2009) and Pinar and Trapp (2008) suggested that textile firms have not established strong knowledge management models. There is a gap in the literature for this for Turkish textile firms.
The Turkish economy, however, weathered the 2008 global financial crisis because of the resilience of its banking industry. The banking industry used the 2001 crisis lessons to improve its knowledge in managing credit risks. As a result, while other developed economies banks were financially weakened since 2008, the Turkish financial sector remained strong, because Turkish banks holding of securities makes more than 30 of their total assets, which enables them to not suffer from the credit crunch (Biggs 2009 Piggott 2008).
As for the mediating factor of the knowledge management model for the Turkish textile sector, knowledge of demand and supply fluctuations have not fully cushioned the textile industry from contraction. Output from textiles, which is a huge export sector, plummeted by 28.3 in 2008 (Economist Intelligence Unit 2009, p.17). Nevertheless, if textile companies can improve knowledge management in the industry, it can become more robust in competing with other national textile competitors.
4.3.2 Porters diamond of competitive advantage and the 2008 global financial crisis
The competitiveness of Turkish economy greatly improved because of the sound fiscal and monetary policies it pursued after the 2001 financial crisis (Piggott 2008). There is great competitive advantage obtained from the welfare governance of Turkey. Sources, on the other hand, showed that the Turkish textile industry cannot compete through cost leadership, because this is already the advantage of the Chinese textile sector (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2). In order to be competitive, the Turkish textile industry must pursue differentiation strategies that can improve perceptions of quality and difference for the Turkish textile.
4.3.3 Analytical Hierarchy Process (AHP) and the 2008 global financial crisis
Using the AHP, the determined weaknesses of the economy during the 2008 global financial crisis hail from these factors liquidity issues, political issues, governance concerns, and lack of innovation and knowledge management (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2 Economist Intelligence Unit 2009). Among these factors, the most imminent are the political issues, because they can arise anytime and can directly affect the economy, followed by governance issues and lack of innovation and knowledge management. Benzing et al. (2009) studied entrepreneurship in Turkey and findings showed that the tax structure provided difficulties for entrepreneurs. There are also poor government financial support for small and medium enterprises and government programs for entrepreneurship (Benzing et al. 2009). Sources also pointed out the lack of innovation and knowledge management that can further weaken the competitiveness of the Turkish textile industry, as the onslaught of cheaper textile from China continues (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2).
4.3.4 Innovation ecology and the 2008 global financial crisis
Studies showed the importance of national context in shaping the innovative behavior of firms (Krugman, 1994, cited in Griffiths et al. 2009, p.377). Woolley and Rottner (2008) state that the first-mover advantage that takes place can come from the earliest innovation policies dealing with science and technology, and economic initiatives reported higher rates of firm foundings (cited in Griffiths et al. 2009, p.377). Turkish national institutions (the education system, patent law, government policies, and RD), however, is analysed as not being able to spur innovation, because of lack of policies and funding for greater innovations in the textile industry (van Rooij et al., 2008, cited in Griffiths et al. 2009, p.377).
4.3.5 Business responsibility at macro and micro levels and the 2008 global financial crisis
Social Responsibility Journal (2008) analysed and compared CSR between Turkey and the UK. Findings showed that their laws do not differ, but compliance is weaker in Turkey than in the UK. Ararat (2008) analysed CSR practices in Turkey, and noted that the culture does not espouse CSR to a higher level compared to other developed countries. She concluded that CSR has to be an exogenous and institutional process, in order to promote it across industries. Another study highlighted that when the economy contracted, female workers are not discriminated, although they received lower pay (Limoncuolu i_li 2009). These gender inequitable practices undermine CSR in corporate levels.
Chapter Five Discussion
5.1 Introduction
The results indicate that the Turkish economy weathered the 2008 global financial crisis better than other countries, because of its sound fiscal and monetary policies. However, using the theoretical frameworks of innovation, business responsibility, and knowledge management, findings showed that the Turkish government lacks more solid and clearer policies on these business management concerns, which could have also contributed to the economic contraction of Turkey from 2008 to 2010. This chapter discusses the findings in relation to the theories described in the review of literature.
5.2 Summary of research findings
Based on the research findings, the Turkish economy is also affected by the 2008 global financial crisis, as evident in its contractions in the GDP growth rate and sectoral growth rates, from 2007 to 2008, and even until 2009. It can be argued that the effects of the financial crisis became more pronounced during 2009, as the effects of the recession showed up in the economic index a year after it arrived in Turkey. Findings also showed that while the Turkish textile industry suffered, it did not become widely hurt, because of the inherent competitiveness of the industry. Nonetheless, global and domestic textile competition continues to be more intense, especially coming from the competitor from Asia- namely China. Findings also showed that there are weak or unconsolidated practices of knowledge management, innovation, and business responsibility, because of lack of compliance and regulation.
5.3 Knowledge management model
Danskin et al. (2005) propose proactive knowledge management model that do not only cut costs and cycle time, but also develops knowledge for predictive management purposes (p.96). The proactive dimension of knowledge management in Turkey is not readily apparent, unless to cut costs. There is a need to further study how knowledge management is applied and promoted on the national and local firm levels, especially during the 2008 global financial crisis, so that it can be determined exactly how the lack of more concrete knowledge management policies and practices contributed to the economic contraction from 2008 onwards.
5.4 Porters diamond of competitive advantage
Based on the competitive advantage theory, Turkey cannot compete with contender China as a low-cost textile industry, which is one of the reasons that the textile industry contracted during the 2008 global financial crisis. It can only compete through product differentiation. Pinar andTrapp (2008) highlight the need for differentiation, because textile is something that can also be sold for differences in perceived values. This will be explored further in the recommendations chapter of this paper.
5.5 Analytical Hierarchy Process (AHP)
AHP already designates the following priorities, from top to lowest priority political issues, lack of innovation and knowledge management, governance concerns, and liquidity issues (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2 Economist Intelligence Unit 2009). These priorities are seen from the impacts of the 2008 global financial crisis on GDP, inflation rate, and exchange rate, which can be lessened if the government paid attention more to political issues, lack of innovation and knowledge management, governance concerns, and liquidity issues.
5.6 Innovation ecology
There is a need for national innovation trajectories that can mould the innovative outcomes of the country, which is one of the reasons that the Turkish economy also slowed down in 2008 (Griffiths et al. 2009, p.377). This can be done through connecting public and private agencies that promote and develop innovation ecology (Griffiths et al. 2009, p.377). Such ecology is not yet evident in the Turkish textile industry, which can also help explain its lower performance from 2008 to 2009.
5.7 Business responsibility at macro and micro levels
Business responsibility requires further enhancement for macro and micro levels. Since it is not embedded in the organisational and national cultures, there is a necessity to make business responsibility an exogenous variable (Ararat 2008). Government intervention will be perennial in promoting widespread CSR in the textile industry, which can lead to more equitable business practices, and these actions can decrease the direct impact of the 2008 global financial crisis on the economy, as already seen in the business responsibility in the banking sector which also made it stronger during the 2008 financial crisis.
Chapter Six Conclusions and recommendations
6.1 Conclusions
Findings of this dissertation showed that the Turkish economy is also affected by the 2008 global financial crisis, but its monetary and fiscal policies prevented it from being greatly contracted. On the other hand, the Turkish textile industry remains regionally competitive, because of perceptions of value for its products. As a result, it is not greatly affected by the 2008 global financial crisis, although its revenues dipped. However, these quality perceptions are being not enough, because of the cost leadership of other global and EU textile competitors, primarily China. It is decisive for the Turkish government to intervene and ensure that it can prepare the textile industry, so that it can establish a stronger positioning in the market. It is important to ascertain competitiveness through policies that promote and reward organisational practices of knowledge management, innovation, and CSR. Knowledge management strengthened the banking sector for the 2008 global financial crisis and the same can be done for the textile industry and the whole economy. The government should take the lead in promoting these factors, through policymaking and providing economic incentives for responsive companies.
6.2 Recommendations
The primary recommendations will involve three factors- knowledge management, innovation, and business responsibility. According to the review of literature, when properly managed and integrated into the strategic management framework of textile firms, knowledge management, innovation, and business responsibility can be linked to corporate performance, and consequently, to national economic performance. In addition, these factors will be merged to form a distinctive competitive strategy that will reverberate to the textile industry.
6.2.1 Knowledge management
The government needs to pursue a more active policy that can promote knowledge management. This should be supported by IT and IS policies, which will collaborate to help provide relevant and customised knowledge management technology platforms (Danskin et al. 2005). The government should provide an information campaign and projects that support knowledge management through economic incentives, such as tax cuts for companies that can provide and develop knowledge management systems and practices.
6.2.2 Innovation
The government must also reward innovation among industries, through providing RD grants for promising innovative projects. It must be more adamant in forming an innovation technology through linking agencies, resources, and companies. This innovation ecology should also improve entrepreneurship that can also enhance national performance and competitiveness. For the textile industry, ingredient branding can be an effective differentiator. Ingredient branding is the practice of promoting product recognition through the use of one brands key attributes (ingredients) in another brand (Keller 2003 McCarthy Norris 1999 Vaidyanathan Aggarwal 2000, cited in Pinar Trapp 2008, p.32). The primary impetus for using ingredient branding is that it improves differentiating the sector through highlighting different raw materials (Pinar Trapp 2008, p.32). An article argued In this case, an ingredient of the brand could serve as a differentiator for the brand, even if customers do not understand how the ingredient works, and thus improve the competitiveness of the host brand Pinar Trapp 2008, p.32). The government can host competitions that can reward ingredient branding efforts, which can stimulate innovation in the textile industry.
6.2.3 Business responsibility
Business responsibility must also be enhanced in the macro and micro level. For the macro level, the government should study firm compliance through third-party surveys and provide responses through more stringent monitoring practices. For the micro level, the government response can be a strong exogenous variable that can spur CSR at firm levels. The textile industry can take advantage of CSR by promoting diversity management policies that can maximise knowledge management from a pluralistic workforce.
Background
When the financial crisis hit the United States (U.S.), other developed countries were also affected, including Japan and the United Kingdom (UK), which catapulted the global financial crisis. Since many developing countries export to and do business with these affected nations, their economies were adversely impacted, as well (Humala 2009). One of these distressed economies is the Turkish economy, which is still recovering from the market problems that occurred in 2001, due to the terrorist actions in the U.S. (Daloglu 2008). The Turkish Justice and Development Party (AKP)-led government created a stimulus package, made mostly of temporary indirect tax cuts, to advance the economy and it also obtained financial aid from the International Monetary Fund (IMF) (Economist Intelligence Unit 2009, p.3). On the other hand, the Central Bank of Turkey decreased its overnight borrowing rate much more swiftly than formerly anticipated, from 16.75 in October 2008 to 10.5 in March 2009, the lowest level after the 2001 financial crisis (Economist Intelligence Unit 2009, p.7). These efforts, however, could not contain the impact of global competition that exerts its burden on the Turkish economy and the increasingly competitive global textile industry (Tatoglu Demirbag 2008).
1.2 Problem definition
Despite these monetary and fiscal policies, the Turkish economy continued to contract from 2007 to 2009. In 2008, real Gross Domestic Product (GDP) growth decreased from 4.82 in 2007 to 1.12 in 2008 (Euromonitor 2009). By 2009, real GDP growth became -6.50 (Euromonitor 2009). The textile industry also plummeted, as industrial production diminished by 21 in total (Economist Intelligence Unit 2009, p.17). The Turkish textile industry is critical to the economy of Turkey, because textile companies composes 18 of the total companies in Turkey and annual production value of the sector is 30 billion USD (Parlak et al. 2009, p.184). The Turkish textile sector is also the 5th largest supplier in the world and 2nd largest supplier to European Union (Parlak et al. 2009, p.184). If the Turkish textile sector significantly contracts, this will greatly negatively impact the economy. To compound these problems, Turkey battles political issues, as part of its military-led historical development into a republic, and it also has issues regarding its EU accession and IMF grants (Abramowitz Barkey 2009 Birch 2009 Economist Intelligence Unit 2009). These political concerns complicate the impacts of the global financial crisis. There is a need for further examination, on how the Turkish government and private sector, and even regional organisations, can work together in finding immediate and long-term solutions to the weakening Turkey economy and textile industry.
Research aims and objectives
This dissertation aims to identify the effects of the 2008 global financial crisis on Turkey and the Turkish textile industry, in particular. The research aims and objectives are the following.
1.4 Chapter summaries
This dissertation begins with the review of literature. The literature review includes an exploration of the four management models- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility, and how they can undermine or reinforce the impacts of the 2008 global recession. It is followed by the chapters on results and discussion. The results chapter compiles the results of secondary research. The discussion section explores the answers to the research aims. The final chapter consists of the conclusion and the recommendations. The conclusion summarises findings and links results with the conceptual models in the review of literature. The recommendations are for the government and textile firms, so that they can collaborate with each other in forming a more competitive industrial and national performance.
Chapter Two Literature review
2.1 Introduction
This literature review discusses the concepts that are involved in the four management models that will be used for this paper- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility. The review of literature indicates the importance of knowledge management, business responsibility, and innovation to the competitiveness of firms and the Turkish economy, as a whole, wherein if they contribute to the competitiveness of the Turkish industries, this can decrease the impact of the 2008 global financial crisis. There is, nonetheless, a gap in understanding the competitiveness of the Turkish industry with respect to other nations, which this paper can no longer cover.
2.2 Impacts of the 2008 global financial crisis
The 2008 global financial crisis demonstrated how developing economies have been increasingly dependent on the economies of First World countries, for imports, exports, and how they are deeply interconnected through the channels of interest rate and exchange rate (Subrahmanyam 2009, pp.36-37). The Turkish economy decreased by 6.2 in the fourth quarter of 2008, which cut GDP growth to only 1.1 for the whole 2008 (Economist Intelligence Unit 2009, p.8). See Figure 1. The negative GDP continued in 2009, with negative growth rate, -5.90. The constrained domestic bank lending, inadequate foreign capital inflows and frail external demand contributed to the economy contraction from 2008 to 2009. In 2010, an economic think-thank predicted that GDP growth will improve to a modest 1, but this will rely on the incremental improvements of the credit conditions and a more secure exchange rate (Economist Intelligence Unit 2009, p.8). Demand in Turkeys primary European export markets is still forecasted to remain frail in 2010, because of the 2008 global financial crisis that has affected global exports industries across Europe and the rest of the world (Economist Intelligence Unit 2009, p.8).
Figure 1 Gross domestic product by expenditure
(TL m at constant 1998 prices where series are indicated otherwise change year on year)
Figure 1 also shows drops in private consumption from 2008 to 2010. Public consumption also decreased from 2008 to 2009, and so total domestic demand sharply drops for the same timeframe (Economist Intelligence Unit 2009, p.8). Export expenditures drop from 2007 to 2008, although a larger fall is seen from 2008 to 2009 (Economist Intelligence Unit 2009, p.8). The impacts of the 2008 global financial crisis are evidently extended to 2010, with 2010 expenditures not showing the same figures as 2007.
Because of the abrupt economic slowdown in Turkey and decreases in international commodity prices, inflation reached 10.43 in 2008, compared to 8.78 in 2007 (Economist Intelligence Unit 2009, p.8). Inflation rate decreased, however, in 2009, at 6.28 due to the inflationary effects of the sharp slide in the value of the lira since early October 2008 (Economist Intelligence Unit 2009, p.8).
The high increase in risk aversion that came with the 2008 global credit crisis in September-October 2008 pushed the Turkish lira to depreciate from an average of TL1.24US1 (TL1.78 1) in September to about TL1.70US1 (TL2.10 1) in late October (Economist Intelligence Unit 2009, p.9). The price volatility in 2009 depreciated lira further to YL 1.56.
Low import demand and lower commodity prices lessened the Turkey s current-account deficit from about US42bn, or 5.7 of GDP, in 2008 to about 67 in 2009. The smaller deficit in 2009-10 should help to decrease the burdens of external financing pressure as the global credit problems made it harder to promote international financing than before the global financial crisis in 2008 (Economist Intelligence Unit 2009, p.10). Hence, it can be seen that the economy of Turkey has been affected by the 2008 crisis, through a direct impact on the GDP, lira value, inflation rate, and public and private expenditure.
2.3 Relationship between Knowledge management and the 2008 Global financial crisis
This sub-section discusses the knowledge management model, beginning with the conceptualization of knowledge, and then followed by the exploration of its internal processes and external advantages. It also links knowledge management with dealing with the 2008 global financial crisis
2.3.1 Knowledge
Few firms understand and invest in knowledge management, especially when they do not value human resources as sources of distinct knowledge. Those who do employ knowledge management can improve and have improved their competitiveness in this information-driven society (Hansen et al., 1999 Nayir Uzuncarsili 2008, p.142 See Appendix A). Davenport and Prusak (1998) explain knowledge as a fluid mix of framed experience, important values, contextual information, and expert insight that provides a framework for evaluation and incorporation of new experiences and information (cited in Danskin et al. 2005, p.92). Polanyi (1966) highlights the definition of knowledge as the blood for effective action.
It is often heard from companies that their employees are one of their greatest assets, because of the knowledge they bring to the organisations (Crook et al. 2008 Halley Beaulieu 2005). Several scholars attest that knowledge exceeds in importance, compared to other physical properties (Spender 1996 Grant and Baden-Fuller 1995 Grant 1997, cited in Nayir Uzuncarsili 2008, p.142), including natural resources and finance (Quinn et al. 1996 Martinez 1998 Numri 1998, cited in Nayir Uzuncarsili 2008, p.142). It is because finance and natural resources can be accessed by anyone, but valuable knowledge can be limited to organisations and its people (Guillot Lincoln 2005).
2.3.2 Knowledge and the 2007 global financial crisis
Knowledge can be seen as strategic source of competitiveness, which can reduce the impact of the 2008 global financial crisis. Though there are no existing studies that makes this direct link, Piggott (2008) indicated that the strength of Turkish financial sector came from the strong government reforms made after Turkeys catastrophic banking failure of 2001. This reaction to the 2001 financial crisis is considered as a form of knowledge, which strengthened the banking sector when the 2008 global financial crisis hit Turkey. Piggott (2008) highlights that The wisdom of government regulations that were once deemed overly strict is now apparent. While international banks are struggling to keep regulatory capital ratios above the 8 minimum, the Turkish banking sector has an enviable capital adequacy ratio of 17. Because of the knowledge gained from the previous crisis, the banking sectors stringent policies enabled it to be financially prepared, because it has high banking assets
2.3.3 Knowledge management and internal processes
The value of developing knowledge within the firm relies on the organisations ability to scrutinise and take up newly made knowledge from numerous sources and then to incorporate this knowledge into its present knowledge base (Cohen Levinthal 1990 Hamel 1991, cited in Danskin et al. 2005, p.93). Hence, companies must organise and administer existing knowledge. This can be referred as managing organisational memory, wherein the latter is described as the the means by which knowledge from the past is brought to bear on present activities, thus resulting in higher or lower levels of organisational effectiveness (Stein 1995, cited in Danskin et al. 2005, p.93).
Given these advantages of knowledge management, this section proceeds to a knowledge management model. Danskin et al. (2005) present a proactive knowledge management model that do not only cut costs and cycle time, but also develops knowledge for predictive management purposes (p.96). See Figure 2. It can be seen from this figure that the knowledge management interconnects the whole value chain stakeholders, so that the company can choose from the firm strategy of cost leadership or differentiation leadership. This model will be useful in analysing the Turkish economy and the textile industry and providing theoretically sound recommendations.
Figure 2 Knowledge management model
Source Danskin et al. (2005, p.96)
2.4 Analytical Hierarchy Process (AHP)
2.4.1 Porters diamond of competitive advantage
In order to understand the Analytical Hierarchy Process (AHP), Porters diamond of competitive advantage must also be discussed. Porters model provides the theoretical basis for the AHP (Danskin et al. 2005, p.97 Shafaei 2009). Porters (1980) generic business strategies are commonly used frameworks for determining channels to competitive advantage within an industry. Two such strategies are applicable to the apparel and textile industry 1) A cost leadership strategy, wherein the firm concentrates on factors that allows it to complete and uphold low per unit costs and 2) A differentiation strategy, which requires making a different image or value for a product or service, whether they are true or imagined (Danskin et al. 2005, p.97). In addition, the review of literature shows that the Porters framework of generic strategies provides the insight that the American textile and apparel industry pursues one of these differentiation strategies 1) Market-based differentiation where an organisation seeks to set itself apart from the competition primarily through product positioning or 2) Innovation-based differentiation where the organisation attempts to differentiate itself through innovative application of technology to meet customer needs (Danskin et al. 2005, p.97). The first mode is more common in the U.S., but not in the Turkish textile industry that has weak innovation and technology in textile compared to other countries (Economist Intelligence Unit 2009).
2.4.2 Analytical Hierarchy Process (AHP)
The Analytical Hierarchy Process (AHP) is first used by Saaty (1980), which concerns structuring multiple-choice criteria into a hierarchy, assessing the relative importance of these criteria, comparing alternatives for each and determining an overall ranking of the alternatives (Shafaei 2009, p.24). Based on this study, the weaknesses of the AHP are the ratings of the constitutive element for each index, which rely on the subjective beliefs of experts (Shafaei 2009, p.24). In addition, the interviewees are presumed to have the same level of confidence for all the pair wise comparison (Zahedi 1996 Yang Lee 1997, cited in Shafaei 2009, p.24). This means that the effectiveness of AHP relies on the constancy of the data gathered from experts on pair wise comparisons of the criteria (Shafaei 2009, p.24). Sirikrai and Tang (2005) also used an AHP-based model to investigate the degrees of significance of indicators of industrial competition (cited in Shafaei 2009, p.24). The results show that AHP can be used to assess the competitive performance of competing companies. Chang et al. (2006) expanded a hierarchical arrangement for identifying the factors that shape the competitiveness of a firm (cited in Shafaei 2009, p.24). These factors are connected to the sources of competitiveness for the Porters diamond of competitive advantage. Their findings showed that AHP can be used as a valid approach for evaluating the competitiveness of firms and they also named weaknesses that Saaty (1980) also noted. The importance of these articles is that they applied AHP for competitiveness assessment and they also identified the weaknesses of the model.
2.5 Innovation ecology
Competitiveness can also be derived from innovation, as many firms can show. This sub-section discusses innovation as a concept and components of innovation ecology.
2.5.1 Innovation
Innovation is defined as
the ability to develop products to meet the needs of market, 2) the ability to use existing technology to develop products, 3) the ability to develop new products or update existing products to meet the needs of markets, and 4) the ability to acquire new technology to create new opportunities. (Liao et al. 2009, p.161).
This definition covers the customer-centricity of innovation, as well as the abilities and resources needed to create new products. Liao et al. (2009) studied the link between innovation and knowledge management, and they concluded that knowledge acquisition is positively related to innovation capability.
2.5.2 Components of innovation ecology
Mark Stefik, Research Fellow and Manager of the Information Sciences and Technologies Laboratory at the Palo Alto Research Center in California said We live and work in . . . an innovation ecology, a collection of people and organisations whose joint contributions make breakthroughs possible. It includes universities, government funders, venture capitalists, designers, marketing departments, and corporate labs. The challenge is to bring ideas together. Studies described innovation ecology as an environment comprising interconnected institutions, laws, and policies that create an innovation infrastructure that includes education, research, tax policy, and protection of intellectual capital.
2.5.3 Innovation and the 2008 global financial crisis
Innovation can also undermine the negative economic impacts of the 2008 global financial crisis. Kocak and Zeytinli (2009) stressed the importance of technological goods and development for welfare nations like Turkey. Though it does not make the concrete connection between innovation and the 2008 global financial crisis, this article indicates that technological goods and development during economic difficulties can greatly improve the economic conditions of Turkey, even as the 2008 global financial crisis affects it.
2.6 Business responsibility at macro and micro levels
This sub-section discusses corporate social responsibility and national responsibility. It also makes connections between competitiveness and business responsibility.
2.6.1 Corporate social responsibility (CSR)
Corporate Social Responsibility (CSR) describes business practices that adhere to ethical values that comply with legal requirements, that demonstrate respect for individuals, and that promote the betterment of the community at large and the environment (Herciu Ogrean 2008, p.1232 See Appendix B). It involves managing business through policies, systems, and practices that meets or exceeds the ethical, legal and public expectations that society has of business (Greenberg Baron 2008, cited in Herciu Ogrean 2008, p.1232). CSR links business competitiveness and stakeholder needs in order to promote holistic solutions (Jones et al., 2007 Sachs et al. 2006). See Figure 3. This figure shows that business principles, key performance indicators (KPI) and CSR projects must be aligned. See also Appendix B which compares CSR models. These articles show that CSR can be linked to competitiveness, which can be resistant to poor economic conditions, or improve chances of better performance, once the economy recovers.
2.6.2 Business responsibility and the 2008 global financial crisis
Hortacsu and Ozkan Gunay (2008) stressed from their study that ethical behaviour is crucial to the proper functioning of the banking sector. Ethical behaviour considers diverse stakeholders, which can improve the competitiveness of the banking sector. When there are problems with ethics, on the other hand, there will be more problems during the financial crisis, because of litigation problems.
Figure 3 CSR and stakeholders perspective
Source Sachs et al. (2006, p.507)
2.6.3 National responsibility
There is a connection between national performance and competitiveness of firms, and this can be within the context of CSR (Herciu Ogrean 2008, p.1233). Chan and Al-Hawamdeh (2002) studied the position of Singaporean government in expanding e-commerce and the impact of e-commerce on the Singaporean society. The Singaporean government conducted projects to make its country the next information and knowledge gateway (Chan Al-Hawamdeh 2002, p.279). Because of these government projects, many small, medium, and large companies have employed e-commerce to maintain or even become important parts of their operations (Chan Al-Hawamdeh 2002, p.284 Molla Licker 2005, p.104). These articles show the link between national responsibility and competitiveness.
2.6.4 Competitiveness and responsibility during the 2008 global financial crisis
Herciu and Ogrean (2008) studied CSR at macro and micro levels. Findings showed that Even if national performance increases, the firm does not succeed to maintain itself to a specific level but on the contrary the firms global performance decreases (p.1242). These results contradict the general findings of ). Chan and Al-Hawamdeh (2002) and Molla and Licker (2005). Nonetheless, Herciu and Ogrean (2008) indicate that it is also important for companies to practice CSR, even when the country lacks the same responsibility platform. Business responsibility helped the financial sector weather the 2008 global financial crisis, because of the readiness to extend stricter policies.
Chapter Three Research methods
3.1 Research design
This section discusses the research design of this dissertation.
3.1.1 Secondary research
This dissertation involves secondary research. It synthesises the works of articles, books, and newspapers on Turkish economy and textile sector. Secondary research is preferred over primary research, because there is already a great deal of information about the Turkish economy and its textile industry, and it will be more meaningful for this paper to synthesise findings and analyse them according to four theoretical models.
3.1.2 Qualitative versus quantitative research
This research combines qualitative and quantitative research designs, because it uses statistics done by other studies, as well as in-depth information conducted by qualitative articles. The triangulation of the research design can improve the validity of the data, because of the combination of in-depth and statistical measures that can help this paper attain its research objectives. Fielding and Schreier (2001) discuss the relevance of triangulation to research. An article provides a good understanding of triangulation
What is involved in triangulation is not the combination of different kinds of data per se, but rather an attempt to relate different sorts of data in such a way as to counteract various possible threats to the validity of (their) analysis (Hammersley Atkinson 1983, p.199, cited in Fielding Schreier 2001, online).
Triangulating data collection methods and analysis involves multiple methods and theoretical frameworks, which help lessen the weaknesses in validity and reliability of using only either a quantitative or a qualitative research design (Fielding Schreier 2001). In other words, this dissertation does not only ask how the textile economy is affected, but how workers also lived through this experience, which qualitative research can also answer (Newman Benz, 1998, p.14).
In addition, a strong value of triangulation is not that it promises the validity of conclusions, but because it provokes in researchers a more critical, even sceptical, stance towards their data (Fielding Schreier 2001). Qualitative research is often criticised as providing benign conclusions that are based on common sense. It is also criticised as lacking empirical basis, because it cannot generalise from present theories (Thitart 2001, p.80). Quantitative research, on the other hand, is grounded on the positivist paradigm (Thitart 2001, p.81). It can be less inflexible than the qualitative research design, especially as emerging information is gathered. Through triangulation, however, analyses are questioned, and the proneness to ethnographic authority is decreased (Hammersley Atkinson 1983, cited in Fielding Schreier 2001), wherein the qualitative researchers can only defend their findings, because they were there.
Triangulation, on the contrary, allows qualitative work to guide quantitative research in developing a theoretical framework, validating survey data, interpreting statistical findings and improving the analysis of sophisticated responses, choosing survey items to construct indices, and providing case study examples (Fielding Schreier 2001 Thitart 2001, p.81). In some cases, the theoretical system can be derived also from experiences of involved stakeholders. For Sieber (1979), quantitative data can be employed to determine individuals for qualitative study and to demarcate representative and non-representative conditions and participants (cited in Fielding Schreier 2001). Sieber adds that in terms of data analysis, quantitative data can mitigate the holistic fallacy that all dimensions of a situation are congruent, and can show how some situations can also be general (cited in Fielding Schreier 2001). Quantitative data cover wide ranges of nuances that qualitative data can also miss (Newman Benz, 1998, p.13 Thitart 2001, p.81).
In triangulation, data is connected from different sources, which is aligned with relativistic epistemology, one that acknowledges the value of knowledge from numerous sources, rather than to focus only on one source of knowledge and take that source as the ideal or best sour (Fielding Schreier 2001). Triangulation allows for continuous data analysis process, creating fewer constraints on data interpretation and provides more leeway of seeing information from diverse theoretical lenses (Groeben Rustemeyer 1994). These are the justifications for the research design used.
3.2 Potential alternatives
The potential alternatives to the triangulation method are using either a qualitative method or a quantitative method. For the qualitative research method, the researcher could have chosen to conduct interviews with textile company managers and human resource (HR) staff, in order to understand the organisational effects of the 2008 global financial crisis. The disadvantage of this approach, however, is that it cannot capture the whole picture. The advantages are the dearth of details in what is the lived experienced of affected stakeholders (Newman Benz, 1998, p.13). On the other hand, the researcher of this dissertation can also conduct a quantitative research, by studying economic indicators. The advantages of this approach are that it illuminates the economic changes before, during, and after the 2008 global financial crisis and it capture statistical trends. The limitations of the quantitative research, nonetheless, are the lack of understanding the deepness and nuances of the impacts of the 2008 global financial crisis, if the study is limited only to interpreting hard facts. Thus, it is more important to combine qualitative and quantitative methods for this research, so that there will be an in-depth look into the experiences of the textile industry during the 2008 global financial crisis.
3.3 Data analysis
For data analysis, findings are categorised according to their connection to the research aims. Furthermore, the data is also analysed using four management models- knowledge management model, Analytical Hierarchy Process (AHP), Innovation ecology, and Business responsibility. The analysis is verified through additional multi-rating system from colleagues, which also read the manuscript and provided additional insights.
3.4 Validity and reliability
The concurrent validity of this research is tested and improved through using other researches. All the findings depend on the corroboration of data from different sources. Content validity of this research is improved by using triangulation. This should help enhance the inclusion of all content of the constructs being studied, wherein the constructs are the competitiveness of the national economy and textile industry, as well as the importance of innovation and business responsibility to advancing competitiveness. The constructs have relatively weak predictive validity, because it is possible that other raters would interpret the findings in different ways, especially if they believe that other theoretical frameworks are more suitable for this research. Test-Retest reliability can be improved by providing the criteria of analysis and data collection. Nonetheless, the qualitative aspect of the dissertation can yield diverse interpretations. Parallel forms of reliability are improved through a pre-analysis and post-analysis, wherein post-analysis included feedback from doctorate colleagues. Through this approach, it is also possible to have a good measure of inter-rater reliability.
3.5 Research method limitations
Other articles are rejected because they lack relevance and because of lack of space needed to discuss them more for this paper. This can affect the validity of the study, in terms of representing a wide range of theories in economic and industry development. This dissertation is also limited by not using statistical analysis that can provide reinforcing or even counter-analysis, when interpreting the data.
3.6 Research ethical issues
Ethical issues consider mores and issues when conducting research. Unethical and ethical behaviour, however, can vary across cultures. For the Turkish government, it is not considered ethical to speak strongly against it, and some of the political analyses of this dissertation can serve as an affront to them. However, it must be highlighted that there is no intention to malign the Turkish government (Lancaster, G 2005, p.33). Instead, this work aims to help the government identify some systemic problems that must also be resolved, in order to advance a sustainable socio-economic development for the country. The data collected came from public resources, so there should be no access ethical issues in this regard. All possible permissions are also taken, and the writing of the dissertation is carefully done to cite every idea, data, and information that does not come personally from the author of this dissertation.
Chapter Four Results
4.1 Introduction
The 1990s were a poor economic decade for Turkey and government failed to pursue more progressive economic reforms. The 200001 crisis, however, created the motivation to change the governance structures of the economy, through the establishment of the independence of the Central Bank, the modernisation of agricultural support policies, the fortification of banking regulation, the enhancement of powers of regulatory authorities and the creation of new regulatory bodies (Euromoney 2009). In addition, the loans from the International Monetary Fund (IMF) also helped support the economy during the global financial crisis (Economist Intelligence Unit 2009, p.3). This section discusses the impacts of the 2008 global financial crisis on the Turkish economy and the textile industry.
4.2 Turkish economy
The review of literature showed that the 2008 global financial crisis resulted to the contraction of the Turkish economy from 2007 to 2008, which worsened from 2008 to 2009. Low import demand and lower commodity prices lessened the Turkeys current-account deficit from about US42bn, or 5.7 of GDP, in 2008 to about 67 in 2009. The smaller deficit in 2009-10 should help to decrease the burdens of external financing pressure as the global credit problems made it harder to promote international financing than before the global financial crisis in 2008 (Economist Intelligence Unit 2009, p.10). Hence, it can be seen that the economy of Turkey has been affected by the 2008 crisis, through a direct impact on the GDP, lira value, inflation rate, and public and private expenditure.
Hence, the Turkish economy is not completely unscathed. Turkeys economy slowed down since 2006, primarily because of burgeoning deficits, external debt and deflating export demand (Datamonitor 2009, p.16). GDP growth decreased to 4.6 during 2007 and diminished further by 1.1 in 2008 (Datamonitor 2009, p.16). Weak domestic bank lending, inadequate foreign capital inflows and feeble external demand also took place since the 2008 financial crisis (Datamonitor 2009, p.16). The Turkish Lira also depreciated further, which resulted to losses in investment and investor confidence (Datamonitor 2009, p.16). Not surprisingly, the unemployment rate increased to 13.6 per cent in January 2009 from 10.3 per cent in September 2008, whereby 811,000 people became unemployed (TSI 2009, cited in Bakir 2009, p.74).
The global financial crisis in 2008 decreased external demand and led to 8.2 contraction in exports of goods and services in the fourth quarter of 2008, the first contraction in almost seven years (Economist Intelligence Unit 2009, p.16). The steep recession in domestic demand pushed imports to plummet by 23 year on year in the final quarter of 2008, after a 2.8 reduction in the third quarter (Economist Intelligence Unit 2009, p.16). On the supply side, the biggest slowdowns were made by the wholesale and retail sector and the construction and manufacturing industries, where value-added output decreased by 15.4, 13.4 and 10.8, in that order (Economist Intelligence Unit 2009, p.16). High interest rates limited the manufacturers plans to improve production capacity because of the high cost of borrowing, while this also cust domestic demand and international competitiveness by limiting foreign investors and which also drives the value of the lira (Birch 2009, p.165).
Production of capital goods was the most affected, after plummeting to 44.6, which resulted to the stoppage of numerous fixed investments (Economist Intelligence Unit 2009, p.17). Production of intermediate goods decreased by 24, while the production of durable consumer goods lessened by 25.4 (Economist Intelligence Unit 2009, p.17). Output of non-durable consumer goods also decreased 10.1, and output of energy fell by 6.4 (Economist Intelligence Unit 2009, p.17). Sector-by-sector statistics demonstrated that the mining production plummeted by 3.8, output of electricity, gas and water fell by 6, and the output of manufacturing industry, which makes the majority of the industrial production, decreasing by 24.2 (Economist Intelligence Unit 2009, p.17). For the sectors of the manufacturing industry, only food and tobacco products attained a year-on-year increase in output, although the rise is very little, at 1 and 0.7, respectively (Economist Intelligence Unit 2009, p.17). Production of automotives and parts decreased by 60.3, the biggest drop for more than 14 years, and output for radio, television and telecommunications equipment also decelerated by 55.7 (Economist Intelligence Unit 2009, p.17). These figures showed the general decline of the economy, as a result of the 2008 global financial crisis.
Turkeys economy has, nevertheless, weathered the 2008 global financial crisis better than other nations, because it has benefited from prudent fiscal and monetary policies (Datamonitor 2009, p.15).The government wanted to control fiscal policies through the cuts in the expenditure on public infrastructure development (Datamonitor 2009, p.15). In addition, it also increased prime lending rates for commercial banks to remove excess liquidity from the market (Datamonitor 2009, p.15). Inflation in Turkey decreased, as private investments have improved, since 2003 (Datamonitor 2009, p.15). The inflation rate of Turkey lessened from 25.3 in 2003 to 10.9 in 2008, which stayed in single digits in 2006, even as the Turkish lira depreciated (Datamonitor 2009, p.15).
4.3 EU neighbourhood and Turkish textile
One of the affected industrial sectors of Turkey is the Turkish textile sector. Output from textiles, which is a huge export sector, plummeted by 28.3 in 2008 (Economist Intelligence Unit 2009, p.17). Some sources say that this can be more attributed to the global competition than the 2008 financial crisis With the opening of both the EU and Turkish markets to Chinese exports, tough price competition from China has had negative effects on Turkeys textile and apparel industries (Cotton Incorporated Supply Chain 2008, p.1). The Turkish Statistical Institute reported that Turkey remains a robust net exporter of apparel, with estimated 13.4 billion in exports and 1.3 billion in imports for 2008 (Cotton Incorporated Supply Chain 2008, p.1). One source even reported textile companies that increased revenues, because of their competitiveness in servicing customers and providing high-quality products (Reed Kara 2009). These textile firms rode the crisis better, because of combination of cutting prices, layoffs, and improving the value of their products (Reed Kara 2009).
The textile imports are eating up export gains, however. From 2007 to 2008, exports were increased somewhat by 6.1, while imports increased greatly by 53.9 (Cotton Incorporated Supply Chain 2008, p.1). In addition, Turkeys apparel production decreased by 16.9 from 2007 to 2008 (Cotton Incorporated Supply Chain 2008, p.1). The rise in Turkeys imports came from Chinese apparel. From January through September 2007, in comparison to the same duration in 2008, imports from China increased by 60.3 in knit apparel and 48.9 in woven apparel (Cotton Incorporated Supply Chain 2008, p.1). China is the biggest foreign supplier of apparel to Turkey, making up 14.9 of Turkeys overall knit apparel imports and 18.4 of its total woven apparel imports in 2008 (Cotton Incorporated Supply Chain 2008, p.2). This can be due to the slump in the economy that can also motivate buyers to buy cheaper apparel from China.
Chinese textile and apparel shipments to Europe also greatly increased (Curran 2009, p.306). For the first ten months of 2008, the EU imported more from China (an increase of 38.54) than any other region of the world (Cotton Incorporated Supply Chain 2008, p.2). As the global financial crisis affected other EU textile industries total Chinese textile and apparel exports were up 8.43 for the ten-month period (Cotton Incorporated Supply Chain 2008, p.2). Hence, as other textile industries contracted, Chinese textile increased even more during the 2008 global financial crisis. This shows how low cost strategy worked for the Chinese sector, while the Turkish textile industry suffers from the competition from China in its own country and with dealings with other EU member, as well.
4.3.1 Knowledge management model and the 2008 global financial crisis
How did the knowledge management of the government interplay with the 2008 global financial crisis In terms of the knowledge management of the Turkish government, there are efforts to improve the rate of innovations and inventions, although there is no policy or general framework that promotes knowledge management as a whole and for the textile industry in particular (Datamonitor 2009, p.2). Articles from Reed Kara (2009) and Pinar and Trapp (2008) suggested that textile firms have not established strong knowledge management models. There is a gap in the literature for this for Turkish textile firms.
The Turkish economy, however, weathered the 2008 global financial crisis because of the resilience of its banking industry. The banking industry used the 2001 crisis lessons to improve its knowledge in managing credit risks. As a result, while other developed economies banks were financially weakened since 2008, the Turkish financial sector remained strong, because Turkish banks holding of securities makes more than 30 of their total assets, which enables them to not suffer from the credit crunch (Biggs 2009 Piggott 2008).
As for the mediating factor of the knowledge management model for the Turkish textile sector, knowledge of demand and supply fluctuations have not fully cushioned the textile industry from contraction. Output from textiles, which is a huge export sector, plummeted by 28.3 in 2008 (Economist Intelligence Unit 2009, p.17). Nevertheless, if textile companies can improve knowledge management in the industry, it can become more robust in competing with other national textile competitors.
4.3.2 Porters diamond of competitive advantage and the 2008 global financial crisis
The competitiveness of Turkish economy greatly improved because of the sound fiscal and monetary policies it pursued after the 2001 financial crisis (Piggott 2008). There is great competitive advantage obtained from the welfare governance of Turkey. Sources, on the other hand, showed that the Turkish textile industry cannot compete through cost leadership, because this is already the advantage of the Chinese textile sector (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2). In order to be competitive, the Turkish textile industry must pursue differentiation strategies that can improve perceptions of quality and difference for the Turkish textile.
4.3.3 Analytical Hierarchy Process (AHP) and the 2008 global financial crisis
Using the AHP, the determined weaknesses of the economy during the 2008 global financial crisis hail from these factors liquidity issues, political issues, governance concerns, and lack of innovation and knowledge management (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2 Economist Intelligence Unit 2009). Among these factors, the most imminent are the political issues, because they can arise anytime and can directly affect the economy, followed by governance issues and lack of innovation and knowledge management. Benzing et al. (2009) studied entrepreneurship in Turkey and findings showed that the tax structure provided difficulties for entrepreneurs. There are also poor government financial support for small and medium enterprises and government programs for entrepreneurship (Benzing et al. 2009). Sources also pointed out the lack of innovation and knowledge management that can further weaken the competitiveness of the Turkish textile industry, as the onslaught of cheaper textile from China continues (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2).
4.3.4 Innovation ecology and the 2008 global financial crisis
Studies showed the importance of national context in shaping the innovative behavior of firms (Krugman, 1994, cited in Griffiths et al. 2009, p.377). Woolley and Rottner (2008) state that the first-mover advantage that takes place can come from the earliest innovation policies dealing with science and technology, and economic initiatives reported higher rates of firm foundings (cited in Griffiths et al. 2009, p.377). Turkish national institutions (the education system, patent law, government policies, and RD), however, is analysed as not being able to spur innovation, because of lack of policies and funding for greater innovations in the textile industry (van Rooij et al., 2008, cited in Griffiths et al. 2009, p.377).
4.3.5 Business responsibility at macro and micro levels and the 2008 global financial crisis
Social Responsibility Journal (2008) analysed and compared CSR between Turkey and the UK. Findings showed that their laws do not differ, but compliance is weaker in Turkey than in the UK. Ararat (2008) analysed CSR practices in Turkey, and noted that the culture does not espouse CSR to a higher level compared to other developed countries. She concluded that CSR has to be an exogenous and institutional process, in order to promote it across industries. Another study highlighted that when the economy contracted, female workers are not discriminated, although they received lower pay (Limoncuolu i_li 2009). These gender inequitable practices undermine CSR in corporate levels.
Chapter Five Discussion
5.1 Introduction
The results indicate that the Turkish economy weathered the 2008 global financial crisis better than other countries, because of its sound fiscal and monetary policies. However, using the theoretical frameworks of innovation, business responsibility, and knowledge management, findings showed that the Turkish government lacks more solid and clearer policies on these business management concerns, which could have also contributed to the economic contraction of Turkey from 2008 to 2010. This chapter discusses the findings in relation to the theories described in the review of literature.
5.2 Summary of research findings
Based on the research findings, the Turkish economy is also affected by the 2008 global financial crisis, as evident in its contractions in the GDP growth rate and sectoral growth rates, from 2007 to 2008, and even until 2009. It can be argued that the effects of the financial crisis became more pronounced during 2009, as the effects of the recession showed up in the economic index a year after it arrived in Turkey. Findings also showed that while the Turkish textile industry suffered, it did not become widely hurt, because of the inherent competitiveness of the industry. Nonetheless, global and domestic textile competition continues to be more intense, especially coming from the competitor from Asia- namely China. Findings also showed that there are weak or unconsolidated practices of knowledge management, innovation, and business responsibility, because of lack of compliance and regulation.
5.3 Knowledge management model
Danskin et al. (2005) propose proactive knowledge management model that do not only cut costs and cycle time, but also develops knowledge for predictive management purposes (p.96). The proactive dimension of knowledge management in Turkey is not readily apparent, unless to cut costs. There is a need to further study how knowledge management is applied and promoted on the national and local firm levels, especially during the 2008 global financial crisis, so that it can be determined exactly how the lack of more concrete knowledge management policies and practices contributed to the economic contraction from 2008 onwards.
5.4 Porters diamond of competitive advantage
Based on the competitive advantage theory, Turkey cannot compete with contender China as a low-cost textile industry, which is one of the reasons that the textile industry contracted during the 2008 global financial crisis. It can only compete through product differentiation. Pinar andTrapp (2008) highlight the need for differentiation, because textile is something that can also be sold for differences in perceived values. This will be explored further in the recommendations chapter of this paper.
5.5 Analytical Hierarchy Process (AHP)
AHP already designates the following priorities, from top to lowest priority political issues, lack of innovation and knowledge management, governance concerns, and liquidity issues (Curran 2009, p.306 Cotton Incorporated Supply Chain 2008, p.2 Economist Intelligence Unit 2009). These priorities are seen from the impacts of the 2008 global financial crisis on GDP, inflation rate, and exchange rate, which can be lessened if the government paid attention more to political issues, lack of innovation and knowledge management, governance concerns, and liquidity issues.
5.6 Innovation ecology
There is a need for national innovation trajectories that can mould the innovative outcomes of the country, which is one of the reasons that the Turkish economy also slowed down in 2008 (Griffiths et al. 2009, p.377). This can be done through connecting public and private agencies that promote and develop innovation ecology (Griffiths et al. 2009, p.377). Such ecology is not yet evident in the Turkish textile industry, which can also help explain its lower performance from 2008 to 2009.
5.7 Business responsibility at macro and micro levels
Business responsibility requires further enhancement for macro and micro levels. Since it is not embedded in the organisational and national cultures, there is a necessity to make business responsibility an exogenous variable (Ararat 2008). Government intervention will be perennial in promoting widespread CSR in the textile industry, which can lead to more equitable business practices, and these actions can decrease the direct impact of the 2008 global financial crisis on the economy, as already seen in the business responsibility in the banking sector which also made it stronger during the 2008 financial crisis.
Chapter Six Conclusions and recommendations
6.1 Conclusions
Findings of this dissertation showed that the Turkish economy is also affected by the 2008 global financial crisis, but its monetary and fiscal policies prevented it from being greatly contracted. On the other hand, the Turkish textile industry remains regionally competitive, because of perceptions of value for its products. As a result, it is not greatly affected by the 2008 global financial crisis, although its revenues dipped. However, these quality perceptions are being not enough, because of the cost leadership of other global and EU textile competitors, primarily China. It is decisive for the Turkish government to intervene and ensure that it can prepare the textile industry, so that it can establish a stronger positioning in the market. It is important to ascertain competitiveness through policies that promote and reward organisational practices of knowledge management, innovation, and CSR. Knowledge management strengthened the banking sector for the 2008 global financial crisis and the same can be done for the textile industry and the whole economy. The government should take the lead in promoting these factors, through policymaking and providing economic incentives for responsive companies.
6.2 Recommendations
The primary recommendations will involve three factors- knowledge management, innovation, and business responsibility. According to the review of literature, when properly managed and integrated into the strategic management framework of textile firms, knowledge management, innovation, and business responsibility can be linked to corporate performance, and consequently, to national economic performance. In addition, these factors will be merged to form a distinctive competitive strategy that will reverberate to the textile industry.
6.2.1 Knowledge management
The government needs to pursue a more active policy that can promote knowledge management. This should be supported by IT and IS policies, which will collaborate to help provide relevant and customised knowledge management technology platforms (Danskin et al. 2005). The government should provide an information campaign and projects that support knowledge management through economic incentives, such as tax cuts for companies that can provide and develop knowledge management systems and practices.
6.2.2 Innovation
The government must also reward innovation among industries, through providing RD grants for promising innovative projects. It must be more adamant in forming an innovation technology through linking agencies, resources, and companies. This innovation ecology should also improve entrepreneurship that can also enhance national performance and competitiveness. For the textile industry, ingredient branding can be an effective differentiator. Ingredient branding is the practice of promoting product recognition through the use of one brands key attributes (ingredients) in another brand (Keller 2003 McCarthy Norris 1999 Vaidyanathan Aggarwal 2000, cited in Pinar Trapp 2008, p.32). The primary impetus for using ingredient branding is that it improves differentiating the sector through highlighting different raw materials (Pinar Trapp 2008, p.32). An article argued In this case, an ingredient of the brand could serve as a differentiator for the brand, even if customers do not understand how the ingredient works, and thus improve the competitiveness of the host brand Pinar Trapp 2008, p.32). The government can host competitions that can reward ingredient branding efforts, which can stimulate innovation in the textile industry.
6.2.3 Business responsibility
Business responsibility must also be enhanced in the macro and micro level. For the macro level, the government should study firm compliance through third-party surveys and provide responses through more stringent monitoring practices. For the micro level, the government response can be a strong exogenous variable that can spur CSR at firm levels. The textile industry can take advantage of CSR by promoting diversity management policies that can maximise knowledge management from a pluralistic workforce.