20 Nov 2014Working Paper Summaries

Entrepreneurship and Business Groups: An Evolutionary Perspective on the Growth of the Koç Group in Turkey

by Asli M. Coplan and Geoffrey Jones

This working paper examines the emergence and growth of diversified business groups in Turkey, where such groups played a critical role in the creation of modern industries and remain dominant in the economy even today. Specifically, the authors focus on the origins of the Koç Group, which grew to be the largest business group in Turkey. They explore the dynamics of its growth from its foundation in 1917 until the late 1980s. Overall, this research supports prevailing explanations of business groups which identify the role of institutional voids, government policies, and contact capabilities. However, the authors also stress that entrepreneurship needs to be incorporated into the determinants of business group growth, especially to account for why particular entrepreneurs built such groups while others, faced with similar conditions, did not. Key concepts include:

Diversified business groups are the dominant organizational form in many emerging markets, including Turkey.
Their emergence and importance has been explained in terms of institutional voids, government policies, and contact capabilities, but entrepreneurship also mattered.
Entrepreneurship mattered not only in the origins of such groups, but in their subsequent growth as large businesses.
In this case study, there is evidence of entrepreneurship that was alert both to the new opportunities offered by the Republic, and prepared to disrupt and create new opportunities.
The founder, Vehbi Koç, was creative in his search for new knowledge and skills, reaching out both to ethnic minorities within Turkey and Western multinationals.
As he grew his business, he also pioneered corporate philanthropy within Turkey, which included having to lobby to change the legal framework of Turkish business.
He also took the lead in Turkey in modernizing traditional organizational methods, although he and his family stayed firmly in control of the group.

Author Abstract

This working paper examines the origins and development of the Koç Group, which grew to be the largest business group in Turkey. This enterprise was an important actor in the emergence of modern business enterprise in the new state of the Republic of Turkey from the 1920s. After World War II it diversified rapidly, forming part of a cluster of business groups that dominated the Turkish economy alongside state-owned firms. This study shows how the founder of the Group, Vehbi Koç, formulated his business model and analyzes how his firm evolved into a diversified business group. The research supports prevailing explanations of business groups, which identify the role of institutional voids, government policies, and contact capabilities, but it also builds on and extends earlier suggestions in both the management and business history literatures that entrepreneurship needs incorporating more strongly as an explanatory factor. This working paper argues that Koç acted as both a Kirznerian and Schumpeterian entrepreneur to build his business group, both in its formative stages and later in its subsequent growth into a diversified group.