IBGC Post #1: Turkey SMEs

The first of the blog posts from Institute for Business in the Global Context researchers comes from Sarah and Jennie, who studied the business practices and the most challenging constraints of Small and Medium-sized Enterprises (SMEs) in Turkey.  Both Sarah and Jennie graduated from the MALD program in May.  As background for their post, they note that:

SMEs comprise 99% of Turkish enterprises and employ nearly 80% of the workforce; thus they have the potential to contribute significantly to the long-term growth of the country.  Currently, the government, followed by private banks and supporting institutions, have increased attention on SMEs, but there are still considerable constraints in the areas of finance, human capital, and enhancing competitiveness.  Through our research, we seek to identify the gaps between existing products and services available to Turkish SMEs and the unmet needs of those businesses, and to uncover potential alternatives to narrow these gaps. 

Here’s the post that they wrote midway through their summer.

The Making of a Team

Turkey team
After three weeks of finishing our literature review, piloting and perfecting our interview questions on nearby business owners, and speaking with many knowledgeable representatives of Turkey’s leading banks and supporting institutions, we took our first field trip as an entire research team to begin interviews with the businesses formally participating in our study.

Our research focuses on two regions of Turkey: the Marmara Region and Southeastern Anatolia.  Istanbul is the primary city in the Marmara Region and that is where we have been based since mid-June.  While we are of course interviewing SMEs in Istanbul, we are also interested in speaking to businesses in other, smaller cities in this region.  Therefore, we arranged to interview SMEs in Edirne, a city where Turkey shares its borders with both Greece and Bulgaria.

Turkey map
We met our two research assistants, Mert and Abid, at the bus station, prepared for a three-hour trip, and took an evening for final preparations before our first interviews with business owners.  To our surprise, it took over two hours just to get out of Istanbul proper, so the bus ride ended up being five hours, during which we learned that we actually had two interviews lined up that very evening!

We had a contact in Edirne scheduling the interviews for us, so while we knew we’d be interviewing four to six businesses over the three-day period, we didn’t have the exact schedule ahead of time.  The realities of field research abruptly hit us as we scrambled to finish final details on the bus.  Due to the importance of relationships and networks in Turkey, we realized that we were at the whim of our Edirne contact as to how many interviews we packed into one day, how much time we had between the interviews, and how long the interviews would actually last.  While it was amazing to finally start interviews, we were suddenly inundated with many tasks such as transcribing, recording, and analyzing this steady flow of information!

While our inner-American spirits would have preferred more time to feel settled, our newly minted Turkish mindset, coupled with the many hours we had previously spent on interview questions, enabled us to complete very productive and informative interviews that evening and over the next couple of days.

In the midst of it all, however, we did get a chance to see a bit of the city, one of the former capitals of the Ottoman Empire.  On our way to one interview, we stopped to explore some historical sites such as Selimiye Mosque, visited a horse stable on the Turkey-Greece border, and one of our research assistants realized his lifelong dream to ride a moped!

Turkey Collage
Exhausted from this hectic schedule of travel and “pop-up” interviews, we finally bonded as a team over burgers at a steakhouse — a new venture of one of our recent interviewees.

All in all, the trip was a rich learning experience and provided some lessons and insights which have already begun to influence the direction of our research.  We are discovering that, despite a wide range of both financial and non-financial offerings by Turkish banks, SMEs are mostly concerned with loans, for which they consider the terms (especially high interest rates) to be quite prohibitive.

Furthermore, while the existing literature indicates that access to capital is the greatest constraint SMEs face, we are actually finding that businesses largely lack skills in cash management and financial accounting principles, which prohibits them from effectively using the available capital.

Last, these businesses also cite difficulties in finding, employing, and trusting qualified employees.  There is a tension felt by business owners who do not want to relinquish control, yet aspire to expand and professionalize their business.  When faced with the decision of whether to hire outside talent, particularly semi-professional managers, more often than not owners prefer to maintain a tight grip on all decisions.

We are now wrapping up our interviews in the Marmara Region, and we will be writing a second post from the opposite corner of the country, Gaziantep!

Turkey team, 2

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