An Applied Analysis for Whether the Relation between Innovation and Foreign Direct Investment is Vicious for Turkey After the Early 1980s

The relation between innovation and foreign direct investment (FDI) is investigated in this paper by using time series Vector Autoregression (VAR) method. The main research question of the paper is whether FDI contributes on development of innovation in Turkey or vice versa. In Turkey, after the structural transformations in Turkish economy, export led growth is taken as vein that feeds to the economic development and thus importance of foreign direct investments have been increasing in the post-1980 period. The obtained findings show that FDI has not been contributing to innovation; however, development of innovation attracts the FDI inflows in that period.