A large part of my work at the Business Standard could be found here, and needless to say, I do not have to write anything else about it!
As a part of my study stint at the Nottingham University Business School, I’ve been subjected to a perpetual torture of conducting a lot of meaningless research which would result into a heap of toilet paper. I’d suggest you all to use it after writing on the other, blank side of that paper. Using it as scratch paper would serve two benefits. The obvious and seemingly clichéd one: of saving the trees and to leave a last chance to see some good shade for a few generations to come. The second, more important one (for me): if by any chance you happen to read them for once, I’d be able to accomplish my aim to screw your nerves with a shameless certainty in an almost entirely mind-boggling manner. On this page, I intend to present a short hint of that work of mine.
On a serious note, why don’t you take a look yourself, before I describe it in more detail? And to me, this isn’t still enough. So, there’s more to come.
Shall we start the story?
“You are a Frenchman, I believe,” asked Phileas Fogg, “and your name is John?”
“Jean, if monsieur pleases,” replied the newcomer, “Jean Passepartout, a surname which has clung to me because I have a natural aptness for going out of one business into another. I believe I’m honest, monsieur, but, to be outspoken, I’ve had several trades. I’ve been an itinerant singer, a circus-rider, when I used to vault like Leotard, and dance on a rope like Blondin. Then I got to be a professor of gymnastics, so as to make better use of my talents; and then I was a sergeant fireman at Paris, and assisted at many a big fire. But I quitted France five years ago, and, wishing to taste the sweets of domestic life, took service as a valet here in England. Finding myself out of place, and hearing that Monsieur Phileas Fogg was the most exact and settled gentleman in the United Kingdom, I have come to monsieur in the hope of living with him a tranquil life, and forgetting even the name of Passepartout.”
- A Conversation between Phileas Fogg and Jean Passepartout in Jules Verne’s Classic Novel “Around the World in 80 Days”
Passepartout might sound a jack of all trades, and going places, but rarely could anyone be as versatile as him. As the story progresses, he and his master go to take a tour the world in a mere 80 days, travelling through places such as Paris, Turkey, India, China, and the USA. The intent to use this daring mission in this novel as a plot is to prove that fortune favours only the brave.
The world of business and corporate strategy too, is analogous to this story by Jules Verne. Managers today face the turmoil of uncertainty from every aspect of the environment in which they operate, and they need to be more versatile than ever before, in the past century of the industrial economy. Companies, in turn have been growing at an incredible pace crossing frontiers and making the geographical divisions blurred, in order to conquer markets and acquire wealth from all over the globe. In this corporate game of creating value, and adding to existing wealth, the managers are Passepartouts, and the shareholders the Phileas Foggs. Together they go around the world, on their quest for value, resources, newer markets, technologies, and ultimately better, prosperous living. And here I am, to guide you thro’!
Mergers & Acquisitions:
Cross Border M&A from Emerging Economies and their impact on Asset Prices and Premiums in Developed Economies
Cross Border M&A from emerging and transition economies is on a rising trend for the past decade. Due to globalisation, transnational corporations from emerging economies have gained size and scale enough to be able to acquire companies in the developed economies and reverse the conventional trend of FDI flows from developed/industrial economies to emerging economies in the form of M&As. Before the reversal of the trend in FDI flows, the M&A activity was largely concentrated among companies from developed economies only.
Owing to the attempts of emerging economy companies to acquire firms from industrial economies, there has been an upsurge in competition among the bidders for the developed economy targets and the prices of the assets have soared. The trend is not only visible in corporations, but also for assets such as natural resources, e.g., sources of oil and gas, mines, and advanced technological know-how. The reflection is thus, seen in the amounts paid as premium to the targets by the bidders. The targets are now being able to realize higher prices for their assets as compared to that a decade ago, when there were not so many sizeable emerging economy bidders.
I hypothesise that due to the increased competition for assets, the asset prices in developed economies command a larger premium than what they did before, and the targets realize a greater immediate gain out of the sale. And finally, I test this hypothesis. How? Ask me!
Innovation and Corporate Strategy:
Patterns of R&D Internationalisation in TNCs
Innovation can be termed as introduction and dissemination of a new idea, product or a technological process throughout society and the economy. It applies to all physical, tangible, ideological, cultural and social aspects of the society and the economy, and is considered to be a primary source of economic growth. Enterprises, the sources of innovation are therefore, social communities that specialise in the creation and internal transfer of knowledge. Applying this logic to the context of international business, a transnational corporation (TNC) is an economic organisation that evolves from its national origins to spanning across borders.
For corporations to be able to innovate, research and development (R&D) is the only formal source. Traditionally, TNCs located their R&D facilities only in their home countries. But with the increasing internationalisation of firms R&D activities also have to be internationalised. The scope of internationalisation has grown beyond the need to adapt to the local markets and the focus is shifting on competing in the markets globally. Therefore, TNCs are integrating their R&D activities located across the globe with their core innovation efforts as part of their competitive strategy. As the costs of R&D increase in the developed economies and the business environment in developing economies gradually becomes competitive, low cost locations for R&D are sought by TNCs.
This research aims to study the evolution of a TNC in its innovative capabilities, in terms of the internationalisation of R&D. The focus is on the economic determinants for the TNC, the process of R&D internationalisation and the resulting policy implications for governments.
Stock Market’s Reaction to Corporate Innovation: Do Investors Value the Innovation Potential of Technology Firms Accurately?
Value Relevant Implications of Changes in Reported R&D Expenditures: A Study of NASDAQ listed Technology Firms (MSc Dissertation)
Technology stocks have been sought highly for long, for the high growth they offer in terms of stock price valuations, over a small time period. Internet, Computer Software and Hardware, Information Technology, Pharmaceuticals, Electronics and Telecommunications companies, and the like have been the ones holding the largest market capitalisations in almost all the markets over the past two decades. However, there seems to be a lack of agreement on accurately pinpointing the factors explaining these high market valuations of the technology firms. The financial information provided by these firms too is prey to this controversy or disagreement and past research shows that reported accounting numbers fail to sufficiently explain the market valuations of technology firms. Researchers therefore go on to claim that the current accounting regulations are irrelevant for accurate valuation of technology firms, as they disallow the recognition of a number of intangible investments, including R&D expenses, as assets. Considering the nature of present-day technology firms, it is largely the intangible or knowledge assets that drive the growth of these enterprises. R&D expenditure is the most common intangible investment in order to create knowledge, innovate and achieve growth of the company. Therefore, it is logical for investors to accord a high value to such R&D investments and incorporate them in the firms’ market value. But, the evidence proves otherwise.
Past research suggests that investors fail to value the R&D investments of technology companies accurately, resulting into a mis-pricing of technology stocks. Research also suggests that rather than the conventional practice of expensing-off R&D costs, capitalisation of R&D expenses yields a closer association between reported R&D expenses and market values. The past researchers therefore propose a change in accounting regulations to allow firms to capitalise the R&D costs. This study examines the proposition further in a way that it measures the year-on-year change in the market values of firms influenced by the year-on-year reported R&D expenses of the firms. The findings report a poor association between change in reported R&D expenses and the change in market values of technology firms, thus supporting the need for better disclosure of R&D expenses. However, there are strong reasons for accounting regulatory authorities to disallow capitalisation of R&D expenses owing to the principles of prudence, objectivity and relevance of reported accounting numbers. Due to this, an attempt is made in this study to provide an alternative mechanism of reporting R&D capital, so as to disclose vital “inside information” to which investors do not have free access unless they estimate the R&D capital of firms themselves, employing various methods suggested by economists. The additional disclosure, although remains to be tested, could be expected to yield a better association between reported R&D expenses and market values of firms.
More work follows, even though I’m back from the University. I’m now looking forward to starting to draft a proposal for my doctoral studies. Keep an eye on this space for more!
