Do innovations affect mergers and acquisitions Eero Lehto Labour Institute for Economic Research Ola

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Do innovations affect mergers and acquisitions?
Eero LehtoLabour Institute for Economic
ResearchOlavi LehtorantaStatistics Finland
IAOS Conference on the New EconomyLondon, 27-29
August 2002 The original publications can be
downloaded fromwww.labour.fi
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Data on innovations and MAs

• The innovation data used in this study are the
  Sfinno database compiled by the VTT Technology
  Studies. These data have been collected using
  three main sources expert opinions, a review of
  trade and technical journals and a special study
  of large firms. There are about 1,600 innovations
  in this database.
• The data on mergers and acquisitions (MAs) are
  based on the Business Register of Statistics
  Finland complemented with data collected by the
  magazine Talouselämä and covering the years
  1994-1999.

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Some reasons for MAs

• In the literature the following are seen as some
  of the reasons for MAs1. Strivings to
  internalise different benefits of synergies2.
  Strivings to internalise the economies of scale
  and scope3. Managers empire building
• It is possible that innovative activities - which
  create new knowledge assets and reform the nature
  of old assets - make the assets of two firms
  complementary and thus generate synergies between
  the firms. These benefits can be materialised if
  either an acquiring or acquired firm obtains
  access to the relevant knowledge.

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Collaboration or MA

• MA can be used as a means to transfer knowledge
  in such a situation in which collaborative
  schemes do not work.
• The imperfect nature of information often makes
  it impossible to define ex-ante what products and
  what portion of arisen income streams are
  generated by the innovation. This uncertainty
  makes the outcome generated by the innovation
  non-contractible.
• Furthermore, if knowledge is embodied in human
  capital, the benefits of MA as an instrument to
  transfer technology are increased at the expense
  of contractual means.

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Models used in this study

• Acquisition propensity estimates Firm-level
  random effects negative binomial model. Dependent
  variable the number of acquisitions per firm in
  each year, 1994-1999.
• The probability of ownership changes for the
  target firm Firm-level random effects logit
  model for the panel data. Dependent variable
  ownership changes (1), does not change (0),
  1994-1999.

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The signs of the estimated effects
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Conclusions

• In the non-processing industries acquiring firms
  are searching for new technology and target firms
  turn out to be innovators, who in many cases
  possess unfinished innovations and are searching
  for entry to the product market.
• Acquiring firms tend to introduce a new
  innovation two years after the acquisition.
  Recently also Beers Sadowski (2001) have found
  that acquisitions affect the innovation
  performance of the acquiring firm.
• In the processing industries innovative
  (efficient) firms buy technologically inefficient
  firms to transfer their own technology to them.

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Challenges to statistics

• Innovations and changes in business structures
  are essential in the new economy.
• Collecting data on (real) innovations (object
  approach) and on ownership changes to complement
  CIS data on innovations and, on the other hand,
  Business Register data on MAs is crucial for
  statistical relevance.
• Entries, exits, mergers, takeovers, split-offs,
  enterprise groups, joint ventures, strategic
  alliances, changes in ownership, etc. are
  examples of the information that is needed.

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IAOS CONFERENCE LONDON 2002

• Contributed paper
• Title How Africas sub-Saharan developing
  countries can profit of the new economy context
  marked by the implosion of communication ?
• Author
• ACCROMBESSY Félicien Donat
• (Statistics engineering)
• Address BP 323, Cotonou, Bénin
• Tel  [phone] (229) 30 82 44/45 (229)
  39 24 17  Fax  [phone]
• Institut National de la Statistique et de
  lAnalyse Economique (INSAE)
• E mail  afdet_accro_at_yahoo.fr

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Introduction

• With the globalisation of the economy, and with
  the revolution of new technologies of
  communication, the implosion of networking, we
  assist to a rapid increase of the economics
  productivity. The new economy seems to accelerate
  the gap between developing and developed
  countries.
• The multinational companies spread their hegemony
  beyond the countries geographic borders. The most
  important part of the world wealth is
  concentrated by a few groups of firms while the
  technological progress is still continuing at a
  great speed.
• In the same time, most of the developing
  countries, especially, Africas sub-Saharan
  countries, seem being to the gap of the world
  trade.

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Problematic

• Africas countries can, with efficient policies,
  pull out great benefits of the new technologies
  of communication, which subtend the new economy.
• The aim of this paper is to attempt to show the
  ways these countries should insert themselves
  favourably the new economy process and its
  gigantic supported technology.
• Recommendations provided to the actors of those
  developing countries.

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1 The expansion of the new economy

• 1.1 Technological basis of the new economy
• The new economy is the fruit of the technological
  innovations.
• eg. Arpanet project, the first version of
  internet in 1971
• first microprocessor (1974),
• personal computer,
• computer and software (Micrososft, Intel, Cisco
  and Dell)
• Later, in the years 1990, the founding of the
  start-ups,
• the expansion of the venture capital will
  contribute to the development of the new economy
  phenomenon with the concept of globalisation.
• Then two categories of components are at the
  basis of the expansion of the new technology of
  information and communication the
  microelectronic components such as
  microprocessors, memories, chip or optic fibers,
  lasers and the software.

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• 1.1 The sectors of the new economy
• For the statisticians, the choice is made on the
  sectors of economic activities and products.
  International organisations such as the United
  Nations Statistics Department (UNSD) attempt to
  co-ordinate the definition of new sectors of ICT.
• On the international level, three channels are
  defined as the new economys activities
• the computer science which integrates the
  machinery (material) and productions branches and
  its connected services activities, particularly
  maintenance services
• the electronics in the production and
  manufacturing of components
• and the telecommunications including service
  activities and also equipments manufacturing.
• In the USA, the ICT sectors are extended to
  those, which distribute multimedia programs and
  trading of ICT goods and services.

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2 The overthrow of the traditional economic
statement

• 2.1 New organisation of the production
• - A new kind of work organisation appears.
• E.g. the start-up, their sectors of activities
  are
• computer data processing, computer manufacturing,
  networking and internet, multimedia,
  telecommunications, simply, ICT sectors.
• - Technological and financial revolutions of the
  years 1980-1990.
• - Valorisation of research activities on the
  market.
• One of the reasons of the success of the start-up
  provides of the part of the research and
  development activities.
• The context of globalisation seems to profit to
  the developed countries enterprises. Then great
  inequalities are observed with developing poor
  countries.

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2.2 The new face of the world economy domination
of the developed world.

• The developed countries dominate the
  international trade.
• - According to the World Report on human
  development 2000, at the end of the years 1990,
  the fifth part of the world population living in
  developed countries holds
• 86 of the word GDP against scarcely 1 for
  majority of poor
• 68 of the direct foreign investments against
  scarcely 1 for the poor
• 74 of the world telephone lines, the most
  elementary communication tool nowadays, against
  1.5 for the most poor.
• With only 19 of the world population, the OECD
  countries supply 71 of the world exchange of
  goods and services, receive 58 of the foreign
  direct investments and possess 91 of internet
  internet users.
• .

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• The question is to know if developing countries
  could have some profit from the ICT without
  producing it? In other words, could them organise
  themselves in order to recover profit in user
  sectors? It seems in fact possible, but in
  favourable conditions.
• Moderation to learn and to have good skills in
  ICT products needs to have great knowledge of its
  culture, then to increase capabilities in
  conceiving and in producing new technology

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3 Some policies to make developing countries
pulling out profit of the new economy

• 3.1 Social and politic policies Promote and
  liberalise the access to information and
  communication for more democracy and governance
• Some social and politic conditions
• authorities must facilitate the access of all the
  population to information and its technology.
• Democracy and Good governance
• the following aspects are important
• Education.
• Health, agriculture and others ICT user sectors.
• Research groups.
• Freedom of the press.

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3.2 Economic policies

• Evidently, economics is the motor of development
  in any country.
• Good governance in economy is the first condition
  to fulfil.
• Specific measures should be provided in order to
  promote local and regional start-up.
• Promotion of innovating small business Improve
  the private sector.
• For example, those sectors must be developed in
  Africa
• Art and culture by using multimedia distribution
  tools (web sites creation, CD-ROM, etc)
• Tourism We the part of tourism of countries such
  as Mauritius, Spain, Switzerland, etc. Africas
  countries have undeniable potentials in tourism
  and must profit of ITC to diffuse them

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• Craftsmen craft industries, local handicrafts
  must be encouraged.
• All those products must be available on internet
  in order to join the great market of the world
  wide web.
• Improve trade.
• Promote E-commerce or E-business
• Some heads of States in Africa have an initiative
  named New Partnership for Africas Development
  (NEPAD). It is a great deal. But at the first
  level, the countries have to create adapted
  environment for the development the social,
  politic and economic policies mentioned above.

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Conclusion

• The growth of Information and Communication
  Technology (ICT) computer, electronics,
  telecommunications, audio-visual broadcasting in
  USA implies the improvement of the productivity.
  Dynamic growth ICT manufacturing sectors
  (hardware and services) risen in 1998 3.8 of
  total jobs and value added of more than 8 of
  GDP, while ICTs share in business Research and
  Development reached 54 thats known as the new
  economy.
• This economic revolution born in the USA reached
  all the world and can be for developing countries
  especially, as the paper attempts to show it, for
  Africas Sub-Saharan countries an opportunity of
  development.

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• For that, those countries have to put into place
  some radical policies in both socio-politic and
  economic sectors.
• First Democracy, free circulation of information
  and good governance promotion are important,
  primordial to create a competitive environment
  for the development of the ITC some special
  policies are indispensable in education, media,
  production, etc.
• After that economic policies must accompany the
  socio-politic measures by developing small
  business in ITC sectors, promoting private
  sector, improving trade and e-commerce.
• Common measures should success only if each
  country is ready, has prepared itself.

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International comparisons, case of West African
Economic and Monetary Union

• Mister VIGAN Fortune Evariste

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Content

• Abstract
• Introduction
• 1. International comparisons concepts
• 1.1. International comparisons roles
• 1.2. International comparisons and regional
  integration in west africa
• 2. International comparisons tools used by waemu
• 2.1. Uses difficulties
• 2.2. Solutions
• 3. Conclusion

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THE IMPLEMENTATION OF DECENTRALIZATION AND THE
NEW ECONOMY A CHALLENGE FOR INDONESIAN
DEVELOPMENT

• Ali Said
• BPS-Statistics Indonesia
• E-mail ali_at_mailhost.bps.go.id

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THE IMPLEMENTATION OF DECENTRALIZATION AND THE
NEW ECONOMY A CHALLENGE FOR INDONESIAN
DEVELOPMENT

• Background
• Implementation of decentralization
• Implementation of AFTA and other free trade
  agreement
• Objectives of the study
• To set out the problems emerged in the
• implementation of decentralization
• To assess the possible impacts of the
  implementation
• of ASEAN Free Trade Area on Indonesian
  development
• To highlight the role of official statistics in
  the new
• economy and decentralization era

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The Emerging Problems in the Implementation of
Decentralization

• Design of decentralization
• - tight time schedule
• - mismatch between revenues shared and
  expenditures assigned to
• the region
• - increasing barriers to domestic trade
• - appropriateness of regency/city as a unit
  of decentralization
• - problem of coordination
• Lack of socialization of Law on regional
  governance and Law on fiscal balance
• Other potential problems
• - An increase in regional disparities
• - A rising conflict between neighboring
  districts
• - A tendency to increase local taxes and
  charges, triggered by limited
• local revenue at the district level
• - A transfer of corruption to the local
  level

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The Implementation of AFTA Means and Implication

• The realization of AFTA Two Implications
• - increase in connection and networks between
• societies, politics and economies
• - states and political elites prepare to
  implement
• the AFTA regulations
• The realization of AFTA Means in Practice
• - there will be a high competition at all
  market level in
• ASEAN countries (prices and quality)
• - there will be a high competition among
  workers and
• among business communities in ASEAN
  countries

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The Possible Impacts of Globalization on
Indonesian Development

• The Impact of the Implementation of AFTA
• on Decentralization Program
• Positive
• Provide a big opportunity for the local
  regions to
• accelerate local development and the
  success of decentralization
• program
• - foreign direct investment to the district
  
• - other possible direct business
  arrangements
• - direct collaboration between the district
  and foreign
• institutions for local capacity
  building

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• The evidence of Singapore-Johor-Batam (or the
  SIJORI) triangle, which is a limited free trade
  area developed by Indonesia, Singapore and
  Malaysia clearly indicates that the creation of
  free trade area will have a significant impact on
  development of the region.
• BUAT PETA

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• Negative
• Globalization may hamper the success of
  decentralization program.
• Why?
• - Problems faced in the decentralization
  program and the
• emerging problem of high inequality in
  socio-economic
• development between the regions
• - Indonesia is lack behind other 4 neighboring
  countries
• (Singapore, Malaysia, Thailand and the
  Philippines)

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The Role of Official Statistics in the
Decentralization and the New Economy Era

• Collecting information and indicators on
  socio-economic conditions, natural resources and
  human resources to set up development programs
  and policies
• providing data, which are comparable at both the
  national and international level

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• Thank you for your attention

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