!! "# $%&’ () *+ () () % , !! 1 COMPETITIVE ADVANTAGE OF WIND POWER INDUSTRY FOR TURKEY: ANALYSIS OF FACTOR CONDITIONS IN PORTER'S DIAMOND MODEL Kadir Alpaslan Demir 1 ,Egemen Sulukan 2 , Refika Bakoğlu Deliorman 3 , Seda Demir 3 , Tanay Sıdkı Uyar 2 1 $+# -. /) (0) )0 122 "# $+ 2 3) %.# (0) 3 * 12 "# $+ 3 3) %.# (0) 4### /)# 12 "# $+ ABSTRACT The wind energy vision and the official goal of Turkish Ministry of Energy is to achieve 20,000 MW installed wind power capacity by 2023. Turkey had an installed capacity of 796 MW at the end of 2009. Achieving the wind energy vision by 2023, in 13 years, requires 24 times increase in installed wind power capacity. Sustaining such an ambitious performance requires a systematic growth in wind power industry. This systematic growth may be achieved via building a competitive industry. We used Porter’s diamond model to analyze the competitive advantage of Turkish wind power industry. This model is a widely recognized model for analyzing competitiveness of nations. As the first step, in this paper, we analyzed the factor conditions in Porter’s diamond model. Our analysis indicated that Turkey’s factor conditions in wind power industry looks promising and there is potential. However, this potential is only useful when it is properly used as the input to the system to build and sustain the competitiveness of Turkish wind power industry. 1. INTRODUCTION Turkey is a fast developing country and the economy has expanded significantly in recent years. To achieve and sustain stable and constant growth in economy, Turkey has to meet the increasing energy demand while securing adequate supply of energy. Currently, Turkey’s energy demand is mostly supplied through fossil-based fuels. Since Turkey is not a rich country in terms of fossil-based fuels, Turkey has to import a great deal of fossil-based fuels. The rise and fall of oil prices deeply affects Turkey’s economy. As a result, Turkey has to find ways to increase the share of energy supply through renewable resources including hydro, solar, wind, geothermal, wave and other renewable resources to be utilized in the future. Wind power is the fastest growing renewable energy alternative and Turkey has a promising wind power potential. Therefore wind power is attracting attention among other renewable energy alternatives. To create competitive advantage in international scale and to constitute a road map for wind power industry, Turkey must analyze the technical, economical and environmental issues of the wind power industry. This industry is currently at its infant phase in Turkey. Porter’s diamond model [1] is a widely recognized model for analyzing competitiveness of nations. The model is an important work relating strategic management to international economy [2]. Porter’s diamond model has four main and two additional attributes. The main attributes are factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry. The two additional attributes are government and chance. Academicians used Porter’s diamond model to analyze the competitive advantage of a national industry or enterprise. For example, Karácsony used the model to analyze to competitiveness of Hungarian wheat sector [3]; Liu and Song tested the model in China [4]; Oz used the model to examine five industries in Turkey [5]. The industries included in Oz’s study are glass, construction, leather clothes, automobiles and flat steel industries. Bakoğlu tested the demand conditions in the Diamond Model in apparel industry in Turkey [6]. Doegl and Holtbruegge analyzed competitive advantage of German renewable energy firms in Russia using the diamond model [7]. Bellak and Weiss proposed an Australian diamond [8]. Rugman and D’Cruz demonstrated that Canada’s international competitiveness is not explained by the Porter’s home country diamond as Canada is a member of NAFTA, claiming the diamond model valid for explaining success of Japanese, American and E.C.- based multinationals, i.e. the triad [9]. Although there are a few studies indicating that the Rugman and D’Cruz’s double model is more valid in New Zealand [10] and in Mexico [11], Porter’s Diamond is used as a widely recognized tool of national competitiveness in the literature. Zhao, Hu, and Zuo conducted a very similar study to analyze performance of wind power industry development in China [12]. They applied a revised model of Porter’s diamond model to their study. In their model, government is another main attribute rather than being a secondary element and technology is added as a key factor between demand conditions and firm strategy, structure, and rivalry. Their reasoning for adding the government as a fifth attribute was that government plays a key role in wind power industry. For each attribute in the diamond model, they analyzed the issues. In our study, we only focus on the issues related to one of the attributes and that is factor conditions in wind power industry. Furthermore, we use Porter’s original model and we follow the categories of factor conditions as originally presented in Porter’s work [1]. This study is only the first step in our goal to investigate the competitive advantage of