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Regional Science Association 37th European Congress

Rome, Italy 26-29 August 1997

REGIONAL INDIGENOUS POTENTIAL OF ESKİŞEHİR FOR BEING A GLOBALIZED

LOCALITY

ÇALIŞKAN Gülhanim,

Middle East Technical University, Faculty of Architecture, Department of City and Regional

Planning, Ankara, Turkey.

fax: 00-90-312-2101250, e-mail: caliskan@vitruvius.arch.metu.edu.tr

ÖZELÇI Tanyel,

Gazi University, Faculty of Engineering and Architecture, Department of City and Regional

Planning, Ankara, Turkey.

fax: 00-90-312-2308434, e-mail: tanyel@mikasa.mmf.gazi.edu.tr

VAROL Çiğdem,

Gazi University, Faculty of Engineering and Architecture, Department of City and Regional

Planning, Ankara, Turkey.

fax: 00-90-312-2308434, e-mail: varol@mikasa.mmf.gazi.edu.tr

ABSTRACT

This paper is on corporate culture with particular emphasis on the relationships between

local production system and local identity. The point of departure is to examine the

evolution of the relationship between local production system and corporate cultur e. The

issue is particularly discussed in the case of Eskişehir which is a relatively developed

province of Turkey. The paper on Eskişehir presents answers to how this corporate culture

is formed and what role do the agents and the institutions have in building up this

corporate culture. The findings of the research indicates that the advantages of corporate

culture should be utilised for adapting to the changing conditions taking place.

I. INTRODUCTION

In the recent literature, there is a wide discussion about the creation of local development

(Belussi, 1996) on the basis of internal dynamics that are determined by locally embedded

attributes, histories and types of social relations. Within this context, the local production

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culture may provide advantages in adapting to the changes that take place in economic,

social and political structures in a globalizing world (Bellini, 1996).

Corporate culture can only be developed when there is the consciousness in creating a

common future in a local production culture. The corporate culture is characterised by

shared meaning, understanding and sense making (Morgan, 1992). The institutions such as

unions, corporations, and associations; actors such as community leaders and

entrepreneurs; and social values such as trust, confidence and mutual understanding are

crucial for the emergence and evolution of corporate culture in a production system

(Storper, 1992).

In the recent literature, the success stories of local production systems are highly

emphasised (Storper and Harrison, 1991). However, localities with strong local identity but

weak global relations receive limited attention. In other words, competitive potential of

this type of localities is underestimated (Eraydýn, 1991; Özelçi, 1994).

Eskişehir is one of the best examples for localities with strong identity but weak global

relations in Turkey. It has a specific production culture, that stimulates continuity in

development which is inherited from its historical background. High education level,

efforts for technological change, the resilient, creative, initiative-taking industrialists and

diversified industrial structure are the other characteristics of the province.

The corporate culture that is the main determinant of local production system in Eskişehir,

is taken as the core of the discussion within this paper. It is aimed to answer how this

corporate culture has been formed, what type of actors, the relationships between different

actors, and institutions have played role in this formation, and how this corporate culture

has affected the formation of firm structures.

The following sections include a brief description of the Eskişehir province, the

identification of corporate culture in local development, determined by the history of local

industry, local leadership, institutional and firm structures.

II. A BRIEF DESCRIPTION OF THE PROVINCE

Eskişehir is a province located at the centre of Anatolian Peninsula and connected to the

main metropolitan regions (İstanbul, Ankara, İzmir and Bursa) of Turkey by main

transportation networks. It is a medium sized province of Turkey with 668,363 population.

With the 74.5% share of urban population, it can be considered as a highly urbanised

settlement (DPT, 1996). According to the socio-economic and human development indices,

Eskişehir has taken place at the first ten provinces from the 1940s to the 1980s, and

recently increased to the sixth range among the other provinces of the country. In 1996,

Eskişehir has a 1.4% share in GNP, in which agriculture, industry and service sectors have

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11%, 33% and 56% respectively. National income per-capita is twice that of the country

average and export/import rate is 1.5 times higher than Turkish average. Manufacturing

industry value added per-person is 1.35 times higher than Turkey average.

When the sectoral structure has been examined, it is observed that the leading sectors in

the local economy are manufacture of metal goods, manufacture of non-metallic mineral

products, manufacture of wearing apparel and textile, food manufacturing, and

manufacture of wood and wood products. Manufacture of metal goods, and manufacture of

wood and wood products are the sectors having the highest number of work place while

manufacture of metal goods, food manufacturing, and manufacture of wearing apparel and

textile are the sectors having the highest number of employment and value added (ESO,

1993). The total employment is distributed to the sectors as manufacture of metal goods

40%; manufacture of non-metallic mineral product 11%; wearing apparel 15%; food

manufacturing 27%; and other 7% (ESO, 1995, no: 286).

The most important factors for international competitiveness of the sectors in Eskişehir are

the lower level of labour cost relative to other developed industrial provinces of Turkey,

developed international relations and product quality.

According to these factors, textile and wearing apparel sector takes place at the first stage

among others. This sector has a 204% increase in production during last ten years (ESO,

1995, no: 286).

The second most competitive sector is manufacture of non-metallic mineral product.

Domestic raw material, low labour cost, appropriateness to the European standards in

terms of product quality are the advantages of this sector. Ceramics manufacturing, tile and

brick manufacturing, and cement industry are main sub-sectors having competitive power.

Turkey is the eighth largest ceramic producer of the world. Eskişehir has the 38 % of the

total ceramic production of Turkey. Due to the investments, Eskişehir is expected to

become one of the most important ceramic production centres of the world in the next 10-

15 years (ESO, 1995, no: 285; ESO, 1995, no: 286; ESO, 1996, no: 291).

Manufacturing of metal-goods has an equal competitive power with international

competitors. The lower labour cost, equal technology and quality standards, and equal raw

material cost compared to their competitors are the most important advantages of the

sector. The weak financial structure and the inadequate infrastructure are the negative

sides of the sector (ESO, 1995, no: 286).

The competitiveness of Eskişehir in the international market can be evaluated by the share

of each sector in total export values of province. The share of leading sectors in Eskişehir’s

exports are 32% in manufacture of metal goods, 29% in mining and quarrying, 19% in

manufacture of non-metallic mineral products, 9.5% in manufacture of wearing apparel

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and textile, 5% in electrical machine and equipment manufacturing, 4% in food

manufacturing, 1% in basic metal industry, and 0.5% in manufacture of wood and wood

products (ESO 1996; no: 289-290).

III. CORPORATE CULTURE IN THE LOCAL DEVELOPMENT

The special structure of corporate culture of Eskişehir can be understood by examining the

historical perspective of its industry, local leadership, institutions, and firm structures.

A Brief History of Local Industry

In Eskişehir five principal phases of industrial development may be distinguished for this

century. The first period, from the beginning of this century to 1950, is characterised by the

prevalence of local agricultural activities and by the dominance of public investments in

local industrial development. The second period, from 1950 to 1970, is characterised by

the development of small-scale industry mostly based on machine manufacturing. During

the third period, from 1970 to 1980, the private sector gained power. The fourth period

(1980-1990) is characterised by the reduction of the local investment speed due to the

macro economic decisions. The last and continuing period is characterised by the

restructuring of decision making process. The industrialists have perceived the

continuously changing economic conditions since the beginning of the 1990s.

Some of the sectors which identify the local economy today, found its roots in the first

period. At the beginning of this century, the development of Eskişehir’s economy was based

on natural resources and agriculture. It was an important cereal production region. The

biggest flour mills, one of which was later transformed into the biggest biscuit factory of

Turkey, were established in Eskişehir in this period.

During the construction of Berlin-Baghdad railways (1884) ‘Cer Atelier’ were established

and this made important contributions to the industrial development of the province by

generating a qualified labour force. Even today Cer Atelier in the name of Tülomsaş, is the

only manufacturer of railway equipment in Turkey. In the 1930s, the establishment of

Military Aircraft Repair Workshop of Turkish Air forces, Eskişehir Sugar Factory and

Sümerbank Cloth Factory by the government initiative also contributed to the acceleration

of Eskişehir’s economic development.

The soil characteristic of the region was appropriate for the production of tile, brick and

ceramic. Marseilles tile which had been imported until 1927 began to be produced in

Eskişehir for the first time in Turkey in this period. Another sector developed in this

period was the manufacture of wood and wood products. Turkey’s first timber machines

were produced in this period in Eskişehir.

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In the second period (1950-1960), the geographical location, economic mobility and the

dynamism of the public sector made Eskişehir an attractive province for small-scale

industry. Small-scale industry grew up by the qualified labour force experienced in the

public sector. In the 1950s, Bulgarian and Rumanian immigrants, who were generally

artisans and small manufacturers, preferred Eskişehir to settle down, due to the suitable

conditions for small industry. The work discipline, knowledge and experience of the

immigrants made important contributions to the social and economic development of the

province. New production types which were introduced by the immigrants, provided the

development of sub-industries. For example, the agricultural product processing and

mining caused the development of manufacture of metal goods.

In the 1970s, Eskişehir’s manufacturing industry experienced a rapid development. The

private investments undertaken at the beginning of the 1960s, gained power in the 1970s.

The national based private investments preferred to locate in Eskişehir because of the

geographical proximity to raw materials and market, sufficient infrastructure, qualified

labour force, sufficient health and education facilities, suitable social environment,

appropriate land area and land price, construction facilities, local administrators who were

willing to admit the entry of the external investors in the local market (ESO, 1993).

In this period one of the most important determinant was the institutionalisation of

corporate culture with the establishment of Eskişehir Chamber of Industry (ECI) in 1968.

The private enterprises organised independently with this organisation and industrial

capital took important steps. The most important success was the establishment of the

"Organised Industrial District" in 1972. The infrastructure facilities supplied by the

Industrial District, attracted new investments to the province. The large private

investments, related to the manufacture of metal goods, manufacture of non-metallic

products and construction, preferred Eskişehir and its environs. Beside these new

investments, industrialists differentiated their products and began to produce intermediate

and investment goods.

It is observed that the development process of Eskişehir industry declined relatively in the

fourth period (the 1980s) due to the macro-economic policies. At national level, the share

of public sector in industry was reduced drastically, liberalisation in exports and imports

resulted in the reduction of effective protection ratios in manufacturing sectors and the

share of industry within total investments declined. Due to the historical public

investments, having created a statist tradition in production, the province could not adapt

to the liberal economic policies of the 1980s, which have encouraged the international

competition. Before the 1980s, the local leader industrialists did not attach importance to

the internal and external (foreign) capital because of their general perspective which

defined the development of industrialisation with local capital.

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After a recession period, industrialists in Eskişehir began to seek for new objectives which

would stimulate the local dynamics in the 1990s. The Board of Directors of ECI decided to

invite domestic and foreign capital to the region to make investments. How would the

region be attractive for large private enterprises? Firstly, the potential of the qualified

labour force, knowledge and experience inherited from the historical production culture

has been the advantage of Eskişehir. Secondly, the administration of ECI has taken

conscious steps, such as increasing the area of Organised Industrial District from 400

hectares to 2930 hectares, and realising infrastructure investments. This would ensure the

provision of cheap and adequate land for the new investments. With these initiatives, three

new big investments came to the Eskişehir Organised Industrial District, then some others

have followed. During the industrialisation process of Eskişehir, the large establishments

were located at the region by public sector, but now this has been realised by the private

sector. In the 1990s, ECI as a local leader institution has had a crucial role in creating public

opinion for inciting the enthusiasm of local entrepreneurs and for making the region

attractive for the entrepreneurs from outside the region.

High technology industries, that began to develop in this period, are expected to have

important contributions to the stimulation of the industrial development of the province.

By these investments, the establishment of sub-industries will be induced. ECI has

developed a techno park project for ensuring the success of the existing and newly

developing industries by supplying counselling services. This is an important step for

institutionalising the R&D activities.

Local Leaders and The Institutionalisation of Corporate Culture

The local leadership is one of the most important determinant of corporate culture. Human

resources and organisations that constitute the institutional structure and the capital

resource would be stimulated by the enthusiasm of the local leadership. From the

beginning of the local industrial development of Eskişehir, main capital groups -families-,

have acted as local leaders. The first generation of capital groups accelerated the

industrialisation of the region beginning from the first years of Republic (1923). They

formed the basis of the traditional production culture of the locality.

In the 1990s, the accumulation of knowledge and experience of the leader groups, deriving

from the dynamic entrepreneurs of the 1960s and the 1970s, has been the most important

chance of the region for stimulating development.

The institutionalisation of the local corporate culture with the Chamber of Industry gives

the original example of relations among the vanguard personalities and social

developments. Its aim was to introduce the importance of industrialisation which would be

the future of the region.

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After the establishment of ECI, the young board of directors, put forth the subjects of

national industrialisation, local development of Eskişehir, banking, mining, foreign capital,

universities, agricultural reform, European Community, public economic establishments

and industrial districts for consideration. In the discussions, ECI was opposing the mistakes

of the private sector and defending the interests of the whole society for real development.

ECI, unlike its counterparts was not a solidarity institution aiming to preserve only its own

members’ or its own region’s interests.

The term ‘industrialist directed to society’ was developed as the strategy of ECI. It defined

entrepreneurial characteristic of the locality which has the consciousness of social

responsibilities.

ECI has so many contributions to Eskişehir since its establishment. As a unique example in

Turkey, ECI has been giving technology awards to encourage the technological

development in industry. An official ceremony on this occasion has been held among the

members of ECI for every two years since 1985. Additionally, ECI has published research

studies, books, weekly and monthly periodicals and maintained a big and comprehensive

library during its twenty-nine years life.

Firm Structure

Eskişehir’s economy relies on medium and large scale firms, which include the basic

elements of the corporate culture such as informal relations, local consciousness and

entrepreneurial characteristics and traditional behaviour. The production culture of

Eskişehir had created different firm structures during its history. The firms established in

Eskişehir can be analysed in three categorical bases; national, foreign based and locally

embedded firms. In this study, locally embedded firms -the large-scale ones- that reflect all

dynamics of local corporate culture are studied empirically. However, it will be useful to

examine the main characteristics of the national and foreign based firms for a detailed

understanding of the local industrial structure.

Historical background of national based firms of the province goes back to the beginning of

this century. Most of these firms had been established by the public initiative and had

constituted the basis for the local industry. Qualified labour trained in these establishments

had created the most important advantage of the region. Recently, some of them have been

privatised and internalised by the locally embedded firms. Since the 1970s, national private

investments have selected Eskişehir to locate due to some interregional and regional

factors such as the overflow of investments from Istanbul. Then, after a recession period of

the 1980s, in the 1990s, Eskişehir began to attract the national private investment by the

efforts of local decision makers. These national private investments have created

subindustries and provided employment, but could not totally integrate to the region as

part of a corporate culture.

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Foreign based firms, which have also been attracted to the region by the local industrialists,

contributed to the technological development of the local industry.

Locally embedded firms can be divided into two groups: Small and medium scale firms and

large-scale firms. Small and Medium Enterprises (SMEs) sometimes had important roles in

the history of Eskişehir industry by acting as incubators. However, traditionally, they do

not have an agglomerated network structure. Although there is a "Small Industrial District",

SMEs in Eskişehir are scattered in the urban area.. Most of their technology is inadequate to

compete with national and international markets. Their survival is mostly based on the

existence of cheap labour force (Özenç, M., 1996). SMEs in Eskişehir do not have a strong

financial structure, they could not use the methods of integration with foreign capital and

working with a partner. They are away from banking services and the banks are insensitive

to the problems of SMEs. The bottleneck of SMEs also originates from the macro economic

policies which give priority to large scale investment in the state’s incentive policy.

In this study, the large-scale locally embedded firms that reflect all dynamics of local

corporate culture are studied empirically. The main criteria for the selection of the samples

are; the determinants of historical production culture, sensitivity to technological

development, relations with foreign market, taking place in different sectors and the

effectiveness.

In-depth interviews held by the selected examples help us to determine the similarities and

differences of special firm structures. The peculiar structures of the examples that are

examined can be titled as: Case A: a large-scale private firm developed from small-scale

workshops; Case B: a holding company developed by an industrial family; Case C: a firm

stem from a large-scale enterprise; Case D: revitalisation of a bankrupted firm. In these

examples; historical evolution, entrepreneurial structure, local consciousness, inter -firm

relations, globalisation strategies, technological development, and elements of corp orate

culture have been examined.

Case A (figure 1) is a textile firm which was established by a native-born family in 1920, in

the form of workshops for the production of military uniforms. It was organised as a

factory in 1982 for sub-contracting production. Today with 1680 workers, ready-made

clothes are produced for the well-known trade marks of Europe. It is one of the largest

companies of Europe in terms of closed area and production capacity. The firm is a family

enterprise and is managed by young entrepreneurs (35-45 ages), graduated from textile

departments of foreign universities.

The firm has subcontracting relations for production of ready-made clothes with several

textile firms located both at Eskişehir and at provinces like Ýstanbul, Bursa, Ankara where

textile sector has a leading role in their local economy. Inter-firm and business relations

with the external markets are realised with headquarters, and several mediator companies

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in Istanbul. At international level, beside formal relations, in the form of agreements,

informal relations based on mutual trust are the most important mechanisms for problem

solving at production and business spheres.

In the 1990s, the firm has enlarged its production and business areas widely to the sectors

such as, trade, construction, tourism, local media management. The firm is planning to

create its own trade-mark to compete with the world market. To continue its competitive

situation in the market, the firm uses the computer and network supported production

extensively and attaches a special importance to quality. In the near future, the firm plans

to construct a satellite city in Eskişehir to make contribution to the development of the

province. In a way, this reflects their local identity consciousness.

Case B (figure 2) is a capital group forming the holding company. The family came to

Eskişehir from a nearby province. The family acquired large amounts of agricultural land

and began trading at the beginning of this century. The family used the accumulated

surplus acquired from agriculture and trade for founding and machine manufacturing. In

the 1950s, the family were effective in the establishment and administration of a local

bank. The group holding the highest production share in Eskişehir at that period also

established a factory on construction materials, another machine manufacturing factory

and a transportation firm was followed. The family were effective in the establishment and

administration of ECI. In the 1990s, these total 24 firms from different sectors have been

organised as a holding company.

The members of this family have been the most important intellectual representatives of

the development of local industry. They have attached a special importance to the

institutionalisation holding wide range of membership of several civil organisations such as

unions, corporations, associations, chambers at local, national and international level.

They contribute to the institutionalisation at local level with a leading role in the

establishment of a local bank and ECI, and carrying out the local social and cultural

activities. Being aware of multidimensional structure of industrial development, they have

always achieved to be a leader. According to their understanding, technological

development is a crucial factor for the industrial development. So that they established

R&D departments in their firms. Making corporation with foreign collaborators, such as

developing prefabrication techniques in Italy, production in Malaysia with a French firm, is

another strategy of the holding company to achieve technological development.

Case C (figure 3) is a machine factory, born from a historically big industrial establishment.

It was established in 1992 as an atelier, and enlarged to a factory after 1994 by credits

taken from government. The entrepreneur, not belonging to a familial industry tradition,

gained experience in a holding company and then establish his own enterprise.

Entrepreneur has been graduated from a department related to his business. Foreign

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technological knowledge and material support have been employed by the entrepreneur’s

own efforts. Large intermediary establishments have been employed as a tool for

international presentation of the firm. The globalisation strategies of the firm can be called

as efforts for entering global market, by searching for new products, markets and

technologies. University consultancy is widely used. Quality is more important than profit

in the production strategy.

Case D (figure 4) identifies the development, bankruptcy and revitalisation process of a tile

factory. Tile factory, which is the most important tile producer of Turkey today, was

established in 1927 by a family initiative. In the 1960s the capacity of the factory had been

increased and in the 1970s professional administration of the enterprise had been

transferred to Istanbul. In 1992, the enterprise went bankrupt because of the

administrative mistakes. At that time, a marriage realised in the family rescued the factory

from the closed down. The new member of the family, who has engaged in manufacturing

of white goods in three factories, established between 1970-1990, began to handle the

factory. After the transformation of the tile factory, the production recovered and today the

factory supplies 35% of national demand, and exports to European and Middle East

countries.

In this example, adapting to different sectors in production shows the entrepreneurial

capability of taking the advantage of perceived opportunities. Entrepreneurs’ social

environment also help the construction of international business relations.

The tile factory, one of the largest factories of the world, showed that a large scale

enterprise could also become flexible in meeting the demands of its customers with the

new management systems applied in the firm organisation. Inquiry to improve the

organisation of the firm has been held continuously.

Today, the firm makes investments to increase the export potential and competitiveness in

the world markets. The competition strategy of the firm is to achieve high quality in

production. The group search for the new investment areas such as frozen goods, planting

in green house, new energy sources (heat) for integrating to global market of flexible

production.

General Characteristics of Firm Structures: Advantages and Disadvantages

In Eskişehir, firms choose to produce different products. In this way they keep away from

competing with each other. Even the firms dealing with the same sector, strongly

emphasise differences in their products. This causes a lack of motivation for developing

new products.

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In the evolution of the firm structures, the required level of institutionalisation could not be

achieved due to the family enterprise structure. The ownership and professional

administration could not be separated in most of the establishments. Thus, the

conservative and independent characteristic of entrepreneur administrators restrict their

co-operation with other firms in the production activities.

For technological development, firms generally prefer in-house services. By this way,

possible specialisation and synergy effects among firms are wasted. Also training

programmes for the personal take place rarely.

The leading firms have headquarters in Ýstanbul and they establish their global relations

by the mediators located in Ýstanbul. This explains that Eskişehir takes place in global

production relations indirectly.

Beside these disadvantages, there are some positive restructuring processes appearing

recently. The leading firms of the province began to evaluate the processes of localisation

and globalisation mutually. They search for the ways for increasing their product quality as

the basic principle of their production. They develop their firm organisation by using

modern management systems. They search for new production areas to have a competitive

power in the global market. They also began to co-operate with foreign collaborators for

technological development. At the same time most of the entrepreneurs are engaged in

social works and cultural activities (such establishing health centres, schools, sponsoring

cultural activities) to increase the life quality in their province.

III. CONCLUSION

The study helps to discuss the main factors that caused the formation of a corporate culture

and its role in the development of local production system.

A common history, motivations for acting in a common behaviour, such as being included

in an ethnic group (immigrants in the case of Eskişehir), having common desires and

viewpoints (as the local leaders see the future of their province in industrialisation in the

case of Eskişehir) are some of the factors that affect the formation of a corporate culture.

In local production system, the existence of corporate culture may provide the

institutionalisation of the common understandings (as the establishment of ECI in the case

of Eskişehir). These types of initiatives will have a leading role in creating public opinion

for adapting to the emerging new conditions. Corporate culture has also a crucial role for

the stability of local production systems in crisis periods (as Eskişehir preserved its

stability during the crisis periods of the 1930s, the 1970s, and the 1990s).

Corporate culture accommodates a conservative attitude in its structure. However, at the

same time by utilising the advantages of corporate culture through collaborative research

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and development activities, collaborative actions of local and foreign entrepreneurs, and

collaborative relations of different production units, integration to the new global

economic system could be achieved.

NOTES

According to the "Economic and Social Index" developed by State Planning Organisation

Eskişehir took place at the first 10 provinces in 1950-1990 period. Since that period

Eskişehir has shown an increasing trend, and reached the sixth highest level among 76

provinces in 1996. This index is developed through social (demography, employment,

education, health services, infrastructure, life quality) and economic (manufacturing,

construction, agriculture, finance) indicators.

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