Fact one, Innovation need seed money and much more and an environment that nurtures such a culture. Does dollars from abroad help in it.. It is definitely an yes.
It is also a fact that I can sell products to the world, that same product may have no applicability to the Indian context. How would you sell for example e-prescription services to Indian doctors when we as a nation have not much called as medical records? or pharmacies that are fully networked?
Innovation does not develop in vacuum, it needs the funds, the resources human as well as the industry and the market to take them to fruition. It is like saying every patent would make money, most do not, similarly there are a thousand ideas that may not see its chrysalis moment just because of timing issues. Typical cases, e-learning on bandwidth that leaks than gushes. The idea is cool , but never would see the light of the day.
Greed is good, why would I innovate? There are different types of innovation, the one that is done at the grass roots level or in rural India (Which the Urban elite would never see), but these are path breaking innovations, which helps us with keeping our tables full.
We have a tendency to think that innovation is lasers, electronics, large data centres and compute power. Innovation is a beautiful concept that comes out of crazy places, the Mitticool refrigerator is as much an innovation as the big analytics algorithm that flipkart uses.
http://www.rtbi.in/
The research cell does wonderful work bringing innovation to rural areas. The problem many a times is that of the media, innovation is mostly iterative and grows in steps and very few are the bang that we see out of the blue.
To build an environment where innovators survive is important for a country like India to thrive, a country of more than a billion and a few big ticket purchases from foreign shores for these innovators, what does this lead to... Money is a great leveler, people need it and the more they see their brethren making the moolah, you will have a deluge of people who wants to emulate the model, well if it triggers a problem of plenty would we complain?
A good take from across the world about how different countries fared with foreign M&A
Trade is done with the major reason of making a profit, if we leave out the few that have more social function, the reason to trade is to make a profit.
As a country , India needs to be clear as to what is the outcome of allowing for M&A, wherein Indian corporates venture out and buy up other organizations or vice-versa.
Reading through some of the research material it looks like we as a country need to ensure that our objectives and goals are clear, for example..
Are the policies favourable for Indian corporates to buy up foreign firms with the intent to have the economies of scale that would accrue back to the parent company.. A case of Renuka Sugars buying Brazilian sugar mills to cover for a longer crushing season and to cater to the growing sugar and ethanol market in India and Brazil.
We can also talk of Hindalco take over of Novelis , or Airtel ventures into Africa, Tata with JLR or Corus. We can take these examples to see how they have fared. Tata JLR is reaping profits for them when the Indian market is dull for Tata Motors whereas Corus forced a 1.6 billion write off for Tata Steel.? Tata is a great example of two different cases of M&As.
The below are some content from the Internet that would give you a lot of insights....
An interesting study in the UK says that productivity gains due to foreign take overs are positive. This is a bit dated study but check the fact that UK being one of the OECD sees the differential, think of the differential that it can bring about in a country like India.
http://www.jstor.org/discover/10.2307/3569775?uid=3739728&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21104129456771
The study below talks on the positive effects of a takeover on the stock prices of the company being taken over with the impact being significant in developing markets
http://www.ifc.org/wps/wcm/connect/e63a830048a7e593a277e76060ad5911/impact%2Bof%2BUS%2Btakeovers%2Bin%2Bforeign%2Bmarkets-their%2Bdifferential%2Beffects%2Bon%2Bemerging%2Band%2Bdeveloped%2Bmarkets_Natasha%2BBurns.pdf?MOD=AJPERES&CACHEID=e63a830048a7e593a277e76060ad5911
Another positive take on the legal profession as Internal legal firms peddle their wares in India and the move to positively impact
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2344272
The below is a study on the positive impact of M&A on the book value of Indian corporates.
http://www.igidr.ac.in/money/mfc-13/MERGERS%20AND%20ACQUISITIONS%20IN%20INDIA.pdf
This is an interesting take on why mergers do happen and talks about mergers and take overs from a country like OECD and India and US and Europe. The advantages, the reasons thereof and welfare options available.
http://www.econstor.eu/bitstream/10419/72323/1/386330220.pdf
Is a Merger Good or Acquisition Good?
Differentiate between Mergers and Acquisition.
When Google paid for Motorola, the reason was not the large manufacturing capability but the patents. That is a full acquisition.
Mergers are more done between equals, a thing that comes to mind is Compaq and HP. Well Compaq was killed eventually but was more considered a merger at that time. Similarly can we call Chrysler being a subsidiary of Fiat? or is it more like a merger?
Many a times the purchase is to kick start a fledgling business or buying the innovation. So the objectives of a purchase has to be seen in light of why? And many a times these are purchases are made to shore investor confidence and reasons are given as to what is expected.
I am not sure if any study showed that innovation is killed, but to keep you updated, it is obvious fact that the larger the organization, it stifles innovation. The same reason most organizations have a separate R&D divisions which do not follow the over all business guidelines of the operating business.
Take examples of Yahoo, Google or IBM or Tata, the R&D divisions work independently and they have objectives that are far different from that of the parent organization. But innovation is what makes margins better or extends the life of a product or service.
Agreed to the fact that M&A are always not rosy as said or but then what percentage of M&A have a direct impact on the economy? I am running through some numbers, await a more detailed post soon...
So is there research material to back the dribble i have here?
The below PWC report is on the reasons as to why many a M&A is triggered by the need to get the innovation of the taken over organization. If this is the main driver, most of the M&A is done to extend the R&D capabilities and have a positive impact on innovation in the "Taken Over" entity
http://www.pwc.com/en_US/us/advisory/business-strategy-consulting/assets/acquiring-innovation.pdf
The below dutch study clearly states that innovation is positive and M&A are more and more driven by the requirement to be innovative. The three factors discussed are innovation efficiency, innovation outputs and Innovation inputs.
The study has found that M&A have positive impacts as resources available are increased by manifold and has an overall positive effect. But this study is specific to the Dutch industry and may have it skewed in the Indian context
http://final.dime-eu.org/files/Cefis_Sabidussi_B1.pdf
The below is called Doblin's ten types of innovation, a very interesting look at what are the type of innovation that returns the maximum. This Doblin study has the numbers and statistics to prove each of the innovations and why M&A happen in organizations that want to take advantage of the innovation they are buying or merging with.
http://www.doblin.com/tentypes
The below paper from Denmark talks on the negative effects on innovation on the acquired organization. Again the sample is small and can be skewed
http://druid8.sit.aau.dk/acc_papers/5dlrukqlsousbght4rfvefufu5qc.pdf
The sections available publicly talk on the positive effects on innovation from organizations that are merged or acquired.
http://books.google.com/books?id=KH8zpajEYssC&lpg=PA65&ots=BQ7y1BneKb&dq=Effects%20Of%20Acquisitions%20on%20R%26D%20Inputs%20and%20Outputs&pg=PA68#v=onepage&q=Effects%20Of%20Acquisitions%20on%20R&D%20Inputs%20and%20Outputs&f=false
Check this empirical study , it shows that actually M&A can spur more innovation in the acquired company. The reason is that the extra muscle as well as the fact that new knowledge is shared from the parent can be tonic for innovation.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ved=0CGoQFjAJ&url=https%3A%2F%2Farchive.ama.org%2Farchive%2FResourceLibrary%2FJournalofMarketing%2Fdocuments%2Fjmkg.69.1.114.pdf&ei=RqIMVNKfPIyeyAST6IKgDg&usg=AFQjCNFzjLVC1Pii-js7FQdBlAbRUgl_TQ&sig2=FWRTXacaL5OF-Dl9Jv-bcg&bvm=bv.74649129,d.aWw
However, looking at the overall picture, it is quite clear that dismissing it as killing innovation or saying all of these are positive is detrimental to our understanding of the problem, There are too many factors in play, after all every purchase with all the good intent do not go well.
The assumption here can be then, that if the M&A went through well, there is a good chance that the combined entity did well to spur innovation, which may not be the case for the failed ones.
It is also a fact that I can sell products to the world, that same product may have no applicability to the Indian context. How would you sell for example e-prescription services to Indian doctors when we as a nation have not much called as medical records? or pharmacies that are fully networked?
Innovation does not develop in vacuum, it needs the funds, the resources human as well as the industry and the market to take them to fruition. It is like saying every patent would make money, most do not, similarly there are a thousand ideas that may not see its chrysalis moment just because of timing issues. Typical cases, e-learning on bandwidth that leaks than gushes. The idea is cool , but never would see the light of the day.
Greed is good, why would I innovate? There are different types of innovation, the one that is done at the grass roots level or in rural India (Which the Urban elite would never see), but these are path breaking innovations, which helps us with keeping our tables full.
We have a tendency to think that innovation is lasers, electronics, large data centres and compute power. Innovation is a beautiful concept that comes out of crazy places, the Mitticool refrigerator is as much an innovation as the big analytics algorithm that flipkart uses.
http://www.rtbi.in/
The research cell does wonderful work bringing innovation to rural areas. The problem many a times is that of the media, innovation is mostly iterative and grows in steps and very few are the bang that we see out of the blue.
To build an environment where innovators survive is important for a country like India to thrive, a country of more than a billion and a few big ticket purchases from foreign shores for these innovators, what does this lead to... Money is a great leveler, people need it and the more they see their brethren making the moolah, you will have a deluge of people who wants to emulate the model, well if it triggers a problem of plenty would we complain?
A good take from across the world about how different countries fared with foreign M&A
Trade is done with the major reason of making a profit, if we leave out the few that have more social function, the reason to trade is to make a profit.
As a country , India needs to be clear as to what is the outcome of allowing for M&A, wherein Indian corporates venture out and buy up other organizations or vice-versa.
Reading through some of the research material it looks like we as a country need to ensure that our objectives and goals are clear, for example..
Are the policies favourable for Indian corporates to buy up foreign firms with the intent to have the economies of scale that would accrue back to the parent company.. A case of Renuka Sugars buying Brazilian sugar mills to cover for a longer crushing season and to cater to the growing sugar and ethanol market in India and Brazil.
We can also talk of Hindalco take over of Novelis , or Airtel ventures into Africa, Tata with JLR or Corus. We can take these examples to see how they have fared. Tata JLR is reaping profits for them when the Indian market is dull for Tata Motors whereas Corus forced a 1.6 billion write off for Tata Steel.? Tata is a great example of two different cases of M&As.
The below are some content from the Internet that would give you a lot of insights....
An interesting study in the UK says that productivity gains due to foreign take overs are positive. This is a bit dated study but check the fact that UK being one of the OECD sees the differential, think of the differential that it can bring about in a country like India.
http://www.jstor.org/discover/10.2307/3569775?uid=3739728&uid=2129&uid=2&uid=70&uid=4&uid=3739256&sid=21104129456771
The study below talks on the positive effects of a takeover on the stock prices of the company being taken over with the impact being significant in developing markets
http://www.ifc.org/wps/wcm/connect/e63a830048a7e593a277e76060ad5911/impact%2Bof%2BUS%2Btakeovers%2Bin%2Bforeign%2Bmarkets-their%2Bdifferential%2Beffects%2Bon%2Bemerging%2Band%2Bdeveloped%2Bmarkets_Natasha%2BBurns.pdf?MOD=AJPERES&CACHEID=e63a830048a7e593a277e76060ad5911
Another positive take on the legal profession as Internal legal firms peddle their wares in India and the move to positively impact
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2344272
The below is a study on the positive impact of M&A on the book value of Indian corporates.
http://www.igidr.ac.in/money/mfc-13/MERGERS%20AND%20ACQUISITIONS%20IN%20INDIA.pdf
This is an interesting take on why mergers do happen and talks about mergers and take overs from a country like OECD and India and US and Europe. The advantages, the reasons thereof and welfare options available.
http://www.econstor.eu/bitstream/10419/72323/1/386330220.pdf
Is a Merger Good or Acquisition Good?
Differentiate between Mergers and Acquisition.
When Google paid for Motorola, the reason was not the large manufacturing capability but the patents. That is a full acquisition.
Mergers are more done between equals, a thing that comes to mind is Compaq and HP. Well Compaq was killed eventually but was more considered a merger at that time. Similarly can we call Chrysler being a subsidiary of Fiat? or is it more like a merger?
Many a times the purchase is to kick start a fledgling business or buying the innovation. So the objectives of a purchase has to be seen in light of why? And many a times these are purchases are made to shore investor confidence and reasons are given as to what is expected.
I am not sure if any study showed that innovation is killed, but to keep you updated, it is obvious fact that the larger the organization, it stifles innovation. The same reason most organizations have a separate R&D divisions which do not follow the over all business guidelines of the operating business.
Take examples of Yahoo, Google or IBM or Tata, the R&D divisions work independently and they have objectives that are far different from that of the parent organization. But innovation is what makes margins better or extends the life of a product or service.
Agreed to the fact that M&A are always not rosy as said or but then what percentage of M&A have a direct impact on the economy? I am running through some numbers, await a more detailed post soon...
So is there research material to back the dribble i have here?
The below PWC report is on the reasons as to why many a M&A is triggered by the need to get the innovation of the taken over organization. If this is the main driver, most of the M&A is done to extend the R&D capabilities and have a positive impact on innovation in the "Taken Over" entity
http://www.pwc.com/en_US/us/advisory/business-strategy-consulting/assets/acquiring-innovation.pdf
The below dutch study clearly states that innovation is positive and M&A are more and more driven by the requirement to be innovative. The three factors discussed are innovation efficiency, innovation outputs and Innovation inputs.
The study has found that M&A have positive impacts as resources available are increased by manifold and has an overall positive effect. But this study is specific to the Dutch industry and may have it skewed in the Indian context
http://final.dime-eu.org/files/Cefis_Sabidussi_B1.pdf
The below is called Doblin's ten types of innovation, a very interesting look at what are the type of innovation that returns the maximum. This Doblin study has the numbers and statistics to prove each of the innovations and why M&A happen in organizations that want to take advantage of the innovation they are buying or merging with.
http://www.doblin.com/tentypes
The below paper from Denmark talks on the negative effects on innovation on the acquired organization. Again the sample is small and can be skewed
http://druid8.sit.aau.dk/acc_papers/5dlrukqlsousbght4rfvefufu5qc.pdf
The sections available publicly talk on the positive effects on innovation from organizations that are merged or acquired.
http://books.google.com/books?id=KH8zpajEYssC&lpg=PA65&ots=BQ7y1BneKb&dq=Effects%20Of%20Acquisitions%20on%20R%26D%20Inputs%20and%20Outputs&pg=PA68#v=onepage&q=Effects%20Of%20Acquisitions%20on%20R&D%20Inputs%20and%20Outputs&f=false
Check this empirical study , it shows that actually M&A can spur more innovation in the acquired company. The reason is that the extra muscle as well as the fact that new knowledge is shared from the parent can be tonic for innovation.
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=10&ved=0CGoQFjAJ&url=https%3A%2F%2Farchive.ama.org%2Farchive%2FResourceLibrary%2FJournalofMarketing%2Fdocuments%2Fjmkg.69.1.114.pdf&ei=RqIMVNKfPIyeyAST6IKgDg&usg=AFQjCNFzjLVC1Pii-js7FQdBlAbRUgl_TQ&sig2=FWRTXacaL5OF-Dl9Jv-bcg&bvm=bv.74649129,d.aWw
However, looking at the overall picture, it is quite clear that dismissing it as killing innovation or saying all of these are positive is detrimental to our understanding of the problem, There are too many factors in play, after all every purchase with all the good intent do not go well.
The assumption here can be then, that if the M&A went through well, there is a good chance that the combined entity did well to spur innovation, which may not be the case for the failed ones.
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