Turkish textile and clothing SMEs: Importance of organizational learning, digitalization, and internationalization

2.1 TTC industries

TTC industries are the second biggest exporter industries with 27.33 billion USD in 2020 after the automotive industry in Turkey [2]. Furthermore, those industries together are the largest source of industrial employment. Therefore, TTC industries are defined as “Turkey’s oil” in the way of the Turkish economy’s industrialization [11]. Anatolia has been an important center for textile production for more than 3,000 years. The textile and clothing industries were mainly shut down during the last period of Ottoman Empire and those industries were the main actors of an intensive industrial investment program of the Turkish Republic during the 1960s. By the late 1970s, the growth of the Turkish clothing industry had accelerated as it began to receive foreign direct investment from Germany and other European countries. After the liberation of the Foreign Investment Law in late 1980s, TCC industries enjoyed growth until 1999. After 30 years, TTC industries export figures declined in 1999 and this decline occurred because of East European countries’ customs agreement with the EU, slowing of the world economy, fluctuations in exchange rates, and earthquake in Gölcük. In the 2000s, TCC industries had experienced difficult times because of China’s entrance to the world trade organization and reduction in tariffs and quotas in world trade. Furthermore, the 2018 financial crisis and Covid-19 pandemic affected the TCC industries negatively [8]. Although TCC industries experienced decline during the Covid-19 pandemic like the rest of the world textile and clothing industry, the pandemic accelerated the digitalization of the industries. This acceleration occurred mainly because of difficulties with getting in touch with customers as they were used to communicating with their customers through trade fairs or customer visits. TCC SMEs are aware of the importance of digitalization in internationalization but unfortunately they do not have enough knowledge which should be accumulated by organizational learning in their companies [12].

2.2 Organizational learning

Organizational learning has become an important research field in business sciences since the 1990s. There is a consensus amongst researchers that organizational learning should be defined as a change in cognition or behavior [13]. Organizational learning manifests in a variety of ways, including information, cognitions, routines, and changes in behavior [14]. The literature related to organizational learning mainly focuses on how the learning process is established in organizations. Chiva et al. [15] defined two organizational perspectives which are the individual and the social perspectives. In the individual perspective, it is assumed that learning is developed at an individual level and organizations learn through individuals. Social perspective accepts learning as a social process and according to this perspective, organizations learn by communicating with other organizations. With the help of organizational learning, individual knowledge is transformed into organizational knowledge. Most of the researchers agree that organizational learning can be defined as a change in organizational knowledge as a result of organization’s experiences as organizations create new information when they learn from their experiences [14]. The relation of organizational learning and digitalization is studied by Arias-Pérez et al. [16] and their research found that strategic orientation, which is developed by knowledge and organizational learning, has a positive effect on innovation capability. Another research performed by Brand et al. [17] showed that employees, customers, and technology are important for the front end of innovation. As textile and clothing industries are a source for unskilled labor, the education levels of those industries are very low and organizational learning requires qualified human resources and educational skills. Because of the intense competition in the international markets, the pricing is putting pressure on investing in the human resources and training. TCC industries are also experiencing problems related to organizational learning and upgrading the industries to products with higher unit prices seems the only solution to overcome this problem permanently [18].

2.3 Digitalization

Digitalization is one of the most important concepts that shape the appraisal of the business and society. Some academicians compare the impacts of digitalization with the industrial revolution [19]. Legner et al. [20] explains the adoption of digitalization by the business world in three stages. First stage focuses on the positive advantages of digital and information technology from the aspect of automation. The second stage is about the benefits of the World Wide Web (www) and this stage radically changed the way that the business is taking place all around the world. Currently, the world is at the third stage in which development of the Internet of Things, big data, robotic and additive manufacturing systems, and the enormous storing and processing computers take place [20]. Digitalization should not be seen solely as a technological development but it should be viewed as a platform to run a business by enabling to gather knowledge about the factors that are needed to gain a competitive advantage. In order words, digitalization has also a social dimension with emphasis on customers and operations with the main emphasis on new technological innovations. The rapid development of digital technologies and the adaptation of them by many SMEs in their business models have forced SMEs to be more competitive in digitalization. SMEs are paying more attention to the implementation of cross-border digital technologies aimed at transforming the way organizations create value [9]. Managerial support, organizational readiness and culture are organizational antecedents which influence the SME decision and success in digital innovation [21]. The impact of digitalization has already begun to be seen in the textile and clothing industry mainly expanding share of e-commerce, digital marketing, speed of the supply chain management, and compulsory demand for more sustainable production. Although the digitalization of the textile and clothing industries supply chain is one of the most important industries, it is still at the inception stage [22]. However, most of those developments are taking place in the multinational companies in the developed countries. The SMEs operating TCC industries have a long way to go for a digitalized supply chain. With their limited financial and human resource capabilities, TCC industries are mainly focusing on the basic tools of digitalization [18].

2.4 Internationalization

Internationalization is defined as the spread of a company’s manufacturing, sales, R&D, and other business activities beyond the national borders of the country. Companies use export, import, licensing, direct investment, franchise, strategic partnership, merger, and acquisition in international activities. Internationalization gained popularity after the 1990s with the collapse of the former Soviet Union and countries that were socially and centrally planned began adopting the economic system of the Western countries. In this period, globalized production structure forced the value chains to be globalized [8]. Again, in this period, competition amongst countries to attract foreign direct investment became more intense and growth of the multinational companies continued. The internationalization of the TTC industries can be explained by the Uppsala Internationalization Theory. The internationalization of the TCC industries is best explained by the Uppsala Internationalization Theory as the first export markets of TTC industries were mainly Germany and other Western European countries [23].

In order to analyze the relationship of organizational learning, digitalization, and internationalization of the TTC industries, a research model is developed and presented in Figure 1.

Figure 1

Model of the research.

3.1 Quantitative analysis

Digitalization is a process of learning that integrates technology, business, and learning strategies in an entrepreneurial structured organization [25]. However, when the literature is examined, there are a few numbers of research analyzing the effects of organizational learning on digitalization. Previous studies mentioned that the size of the company, knowledge and abilities of the human resources, targets, culture, and structure of the organization are the main factors that have an effect on the digitalization. Organizational learning is critical for the development of innovation and improved process efficiency. It is observed that a flexible culture is more innovative and the digital adoption is more likely to occur and be successful. In this point, Imron et al. [26] conducted a quantitative study on 200 employees working in digital industries and they found that organizational culture has a positive effect on employee innovation capability through tacit knowledge sharing.

Organizational culture in SMEs are mainly directed by the owners’ perceptions, values, and characters and generally the owners are the top managers and they are the decision makers of all or at least key decisions. In addition, the dedication of the owners to the digitalization also affects the adoption process like their decisions. In their research, Alraja et al. [27] collected data from 61 SMEs leaders in Oman to investigate the SME leaders’ attitudes about the factors affecting the digitalization of SMEs. The results of their research showed that SME leaders’ technological, organizational, and environmental abilities positively affect SME digitization process. Similarly, Fachrunnisa et al. [28] revealed the role of agile leadership in SMEs in their strategic flexibility including digitalization. Knowledge and commitment to success are the two important factors for strong digital transformation and SME capability to consume, transform, and develop new knowledge that affects the success of the digital adoption process [27]. The digital adoption and transformation process requires synergy and acceptance amongst employees and efficient knowledge dispensed amongst the company. Another empirical study was conducted by Bouwman et al. [29] on 338 SMEs operating in Europe which have digital business models with emphasis on social media and big data and the results showed that strategic and especially internal innovation-based motives are behind these models. In their research, Annosi et al. [30] concluded that the decision-maker of SME organizational learning capabilities which develop evidence oriented knowledge are very important for the adoption of digital technology. Later, Matarazzo et al. [31] proved in their six cases of qualitative study for the Italian market that organizational capabilities and especially the role of family have a positive relation for achieving a successful digital transformation. By getting inspired by the previous studies and literature, we expected that acquisition and application of knowledge which is generated by organizational learning is positively related to digitalization. Therefore, the first hypothesis of the study is as follows:

H1: Organizational learning has a positive effect for digitalization of TTC SMEs

During the 2000s, international business researchers noticed that digitalization is a critical factor in the development of internationalization. Digitalization is described as a new “game changer” in the internationalization of SMEs worldwide and it offers new opportunities in international markets while at the same time increasing competition in domestic markets [32]. By analyzing 68 international business and management articles by mixed method, Bergamaschi et al. [19] explored the relation between digitalization and internationalization in the time interval 1996 and 2019. According to Bergamaschi et al. [19], between the years 2005 and 2019, the mainstream of the researchers analyzed first, the effect of digitalization on the balance of perceived risks and returns in internationalization and second, the circumstances of digitalization that changes the competitive advantage of internationalization. Another research was conducted by Pereira et al. [33] with questionnaires from 310 Portuguese international companies and the result of their research was that top managers should have better knowledge about the digital technologies and use them in order to be successful in internationalization. Furthermore, Reis et al. [34] state that intense competition in the market due to globalization forces companies to transform digitally before its competitors. Most of the empirical studies related to digitalization and internationalization are based on multinational companies and there are few studies focusing on SMEs which state that SMEs focusing on digitalization have growing export numbers compared to SMEs which do not have digital orientation. In the past decade, extant literature noticed that digitalization is gaining importance and becoming a must to have a strong market position and become successful in the international markets [35]. Vendrell-Herrero et al.’s [36] empirical study exploited a survey with 5,200 data points from 14 geographically dispersed countries’ consumers and tried to analyze how digital transformation supports cultural companies during internationalization and positive relation was found between digitalization and internationalization. Being inspired by the previous studies we hypothesized that digitalization can affect internalization of SMEs. Therefore, our second hypothesis is developed as follows:

H2: Digitalization has a positive effect on internationalization of TTC SMEs

An online questionnaire was sent to 300 textile and clothing SMEs in Istanbul and only 20 usable ones were received. Therefore, 280 companies were conducted for face-to-face questionnaires and from 182 textile and clothing SMEs, 327 face-to-face usable questionnaires were received and we had total of 347 questionnaires through the sampling method of random sampling [37]. Survey items were responded to on five-point Likert scales, with answers ranging from strongly disagree (1) to strongly agree (5).

The research data were analyzed by analysis of moment structures (AMOS) of statistical package for social sciences. The structural equation model was applied to analyze the obtained data. The sample consists of 64% men and 37% women. The age profile of the sample is between 31 and 40 years, 32.6% and 41–50 years, 40.1%. Nearly 50% of our sample are from textile, 40% are from the clothing industry, and the rest are from other sub-sectors such as leather, carpet, and textile accessories, which is nearly a simulation of the real dispersion of the industries. The main export market of TTC industries is the European Union (EU-27) countries and 70% of our sample export to the EU-27 countries. Additionally, 56.8% of our sample make direct export while 34% make indirect export. Technology Readiness Scale, Technology Attitude Scale, Internationalization Scale, and Organization Memory Scale are used as construct measures in the research.

Technology Readiness Scale was adopted by Ozer et al. [38] in Turkish. This scale is used for measuring the technological innovation of SMEs. Factor analysis was used to distinguish the factors of the adapted scale and goodness of fit, comparative fit index (CFI), incremental fit index (IFI) values were found to be above 0.90 which is acceptable.

Technology Attitude Scale of Yavuz [39], which evaluates attitudes toward the use of technological tools and teaching of technology, has the reliability coefficient of 0.87 and in our research, “effects of technology” and “teaching the use of technological tools” dimensions were used.

Internationalization scales are taken from Kaplan’s [40] thesis “Factors influencing Export Performance and a study on the relationship between marketing planning ability and export performance.” The scales of “Knowledge and Experience Employees (3 questions),” “Company’s Export Experience (3 questions),” “Company’s Export Market Information (4 questions),” “Marketing Planning Capability (5 questions),” “Export Performance” (5 questions) scales were developed from Morgan et al. [41]. The scale of “Company’s Export Loyalty” (5 questions) was developed by Lages and Montgomery (2005). The Cronbach Alpha (α) coefficients of knowledge and experience of company employees, export experience, export market information, export loyalty, marketing planning capability, and export performance are 0.891, 0.869, 0.858, 0.855, 0.942, and 0.917, which reveal that the scales are reliable.

The scale of “Organization Memory” is taken from Türkay and Yağcı’s [42] doctoral thesis titled “Market-based organizational learning: Variables that determine market-based organizational learning in hospitality enterprises and their effects on marketing performance.” The scale was adopted from Lopez et al. [43]. The Cronbach alpha coefficient of the entire survey was found to be 86.6% which makes the structure reliable.

In order to conduct analyses in AMOS, the dataset must provide normal multivariate distribution. Mahalanobis criteria based on inter-observational relationships are proposed for the detection of outliers in multivariate and high-volume datasets with near-zero or negative value observations. In this context, multivariate end values are examined with Mahalanobis distance values. The normal distribution of the data used depends on the fact that the distortion and pressure values are between −3 and 3 [44]. All the values of distortion and pressure are between ±3. Confirmatory factor analysis (CFA) was performed to test the validity of the constructs using AMOS by maximum likelihood method. The results of the CFA are highly acceptable. Variables that reduce the fit index of the model were determined and a new covariance was created for the residual values. The model fit has measurements of degree of freedom ¼ 2.257, root mean square error of approximation ¼ 0.060, IFI ¼ 0.0882, Tucker-Lewis coefficient ¼ 0.0876, and CFI ¼ 0.882. Pearson correlation was applied to test the relationship between the constructs. If the Cronbach alpha values are greater than 0.70, it indicates that the constructs are reliable. All the values of the constructs are above 0.70, which shows that they are all reliable.

The structural equation model is applied to test the hypothesis and the results of the structural model are given in Table 1. Commitment to learning, shared vision, and open mindedness has a statistically significant and positive effect on the use of technology (β = 1 < 064, p < 0.05), technological learning (β = 1 < 069, p < 0.05), and technological innovation (β = 0.908, p < 0.05). Obtaining market knowledge has a statistically significant and positive effect on technology usage (β = 0.185, p < 0.05), technological learning (β = 0.207, p < 0.05), and technological innovation (β = 0.184, p < 00.05). The use of technology appears to have a statistically significant and negative effect on export experience (β = −0.272, p < 0.05) and export market knowledge (β = −0.241, p < 0.05), and positive effects on export performance (β = 0.211, p < 0.05). Knowledge and experience of technological education of company employees (β = 0.831, p < 0.05), export experience (β = 1.032, p < 0.05), export market information (β = 0.999, p < 0.05), export loyalty (β = 0.907, p < 0.05), marketing planning capability (β = 0.868, p < 0.05), and export performance (β = 0.602, p < 00.05) are seen to have a statistically significant and positive effect. Technological innovation appears to have a statistically significant and positive effect on the knowledge and experience (β = 0.302, p < 0.05), export experience (β = 0.188, p < 0.05), and export market knowledge (β = 0.216, p < 0.05).

3.2 Qualitative analysis

In the qualitative analysis, interviews were based on three themes: organizational learning, digitalization, and internationalization. Participants were asked 29 semi-structured questions and they were numbered as P1–P14 for confidentiality. The semi-structured interviews which were recorded online by the consent of the participants lasted around 35–40 min. MAXQDA qualitative analyses program was used for all the analyses. First, the interviews were carried out in written format and then content analysis was performed and themes and codes of the research were created. The themes were interpreted in line with the codes they contain and excerpts from the interview texts are also included in order to support the comments. Figure 3 is a thematic map showing the themes and the codes derived from coding of the semi-structured interviews with 14 C-level managers of owners of TTC SMEs.

Figure 3

Code map.

Qualitative researchers are mainly criticized for their validity and reliability. In order to ensure the validity and reliability of the research,

• Literature review has been done in detail throughout the research.

• In order to obtain all the data, the interviews were recorded with the permission of the participants.

• The semi-structured interview questions were reviewed by an academician and an experienced manager.

• A pilot interview was performed and shared with an academician in order to confirm the validity of the interviews.

• According to Patton [45] “in order to ensure internal consistency, the consensus between two coders should be at least 80 per cent.” Our data are coded by two coders and the consensus was found to be 87.50%.

In the qualitative part of the research, the main research questions of “What are the effects of organizational learning on digitalization in TTC SMEs?” and “How does digitalization affect internationalization in TTC SMEs?” are sought to be answered with 29 questions in 12 categories.

The thematic map indicates that organizational learning has sub-themes of obtaining market knowledge, commitment to learning and open mindedness, dissemination of market information, common interpretation, and organizational memory. The digitalization theme has use of technology, not using technology, and technological innovation as sub-themes. The internationalization has sub-themes: marketing and planning capability, export commitment, knowledge and experience of employees, export markets information, export experience, and export performance.

“Indirect export” is the most mentioned code with 28 times in the code map. The participants are using “indirect export” as an entry mode which is very common amongst the TTC exporters. Lack of managerial skills or obligation of working with the Turkey offices of the international brands are the main reasons for indirect export rather than direct export.

The P4 and P5 participants quoted the following:

“[…] we are mainly working with agents and we are always searching for agencies in the markets we want to enter[…]” (P4)

“[…] like the Italian market which is a very difficult market for us to enter, we work with agents[…]” (P5)

Second most repeated code is “market research” with 25 times. All the participants mentioned the importance of “market research.” They mentioned that there has been a positive change in performing market research after digitalization. In the past, fairs and data coming from export associations were the main sources for market research but as the covid-19 pandemic increased the adoption of the digital technologies, companies began using the internet and especially LinkedIn. Generally, participants believe that network relations are very important for market research. Additionally, participants declared that they began participating in online fairs after the covid-19 pandemic. The declarations about the code “market research” of the P2 and P13 are as follows:

“[…] by the help of the internet, when we have a demand, we do not have to visit the potential customer which is very costly, instead we search on the internet for its offices, warehouses, products[…]” (P2).

“[…] the fairs are very important for our market research; in the past we were participating or visiting the fairs physically, after the digital technologies we are attending online. In addition, we use LinkedIn as a tool to get in touch with the companies in our target markets […]” (P13).

“Openness to development” and “Training” are mentioned 21 times in the research.

All the participants mentioned that they are open to the new developments but what differs is their perception about being open to developments. Most of them mention investing in new technology in the production. A few of them stated that they are trying to follow the new developments in digitalization and organizational learning. The training is mainly for adopting the employees to the organizations. Training for the new developments taking in business is not very common for the TTC companies; however, if the employee asks for that most of the time the top management approves that demand. The covid-19 pandemic forced organizations to adopt the digital technologies by training programs mainly offered by the Turkish government as an incentive to SMEs. P1 and P13 participants stated as follows:

“[…] we train the new staff to adopt our company, they attend training related to our work, or how we manage stress, we also offer them personal training.” (P1).

“[…] our management is very open to new ideas related to new production technologies and they support the new and different ideas we present[…]” (P13).

“Effect of pricing” code is mentioned 18 times by the participants. The intense competition in international markets is mentioned by all participants. Although the Turkish Government imposed taxes on the imports from Far East countries, the TTC manufacturers still have difficulties with competing with manufacturers from China, Bangladesh, and Vietnam. They also added that the volatile exchange rates and raw materials make it more difficult to compete with the competitor countries. The participant P11 and P14 quoted as follows:

“[…] it is very very difficult for us to compete with China and other Far East countries, they have cheaper labour costs and raw materials” (P13).

“[…] we produce our own zippers but we cannot compete with Chinese manufacturers because of their low prices and it is very difficult for us to sell to the European market” (P14).

The code “Online Communication” is stated 16 times in the research. Related to digital technologies, the participants are aware of the importance of them but they added that they are just using basic tools of online communication. Covid-19 pandemic forced the participants to use online communication tools more. The participants P6 and P7 mentioned as follows:

“[…] after covid-19 pandemic, we began using online communication tools and mainly email and whats app…” (P6).

“[…] in fact we are not really using the online communication tools, we are just using email and whats app for communicating with our customers […]” (P7).

The code “Digital Platforms” is mentioned 15 times in the research. Most of the participants do not have their own digital platforms, a few of them established their own digital platforms but unfortunately, they were not successful up to now. However, most of the participants are forced to use the digital platforms of international fashion retailers as those retailers are managing their supply chains through their online B2B platforms. Related to this code, P1 and P8 stated as follows:

“[…] we invested and established our own digital platform but unfortunately, it could not meet our expectations up to now …” (P1).

“[…] the international fashion retailers which are our important customers made it obligatory to use their digital platforms and therefore we have to adopt the new digital developments[…]” (P8).

According to the themes and codes in the thematic analysis of the research, the code relation map was prepared. Figure 4 shows the details of the code relation map. In the code map, thick lines show the strong relations between codes and thin lines show weak relations. The relation between “training” and “openness to development,” “change of export markets” and “effect of pricing,” “online communication” and “digital platforms” are the strongest ones in the code relation map.

Figure 4

Relation code map.

5.1 Research limitations

This has been the first research conducted on the TCC industries analyzing the relation of organizational learning, digitalization, and internationalization but it has some limitations. The study was conducted all over Turkey to get a holistic study. Turkey has seven geographic areas, therefore, in order to take a detailed picture of the TCC industries, separate research should be conducted for each geographic area. Second, the study could be replicated among the main competitor countries of the TCC industries.

5.2 Managerial implications

Although SMEs of textile and clothing industries are one of the most important industries worldwide, there is scarcity regarding the studies analyzing the relationship between organizational learning, digitalization, and internationalization of the SMEs. Our research is the first attempt that has a holistic approach embracing all these three factors for SMEs operating in the textile and clothing industries, thus taking an important step in explaining the relations between organizational learning and digitalization plus digitalization and internationalization.

In the light of our study, during the process of internationalization, the TTC SMEs should focus on organizational learning and they should develop the learning skills of their human resources which is a neglected area amongst the TTC SMEs. Developments in the organizational learning skills will help to accelerate the digitization process of the SMEs which will affect the internationalization process of those SMEs positively.