Cross-Border Acquisitions and Firm Value - Case Study Example

?TAIWAN AS LEADER IN IT INDUSTRY COMPETITIVENESS Introduction The power and influence of information technology in the accelerated growth of world economy cannot be over emphasized as information technology has gained a major place in the determination of the rate of economic growth and development for various countries of the world (Pagano and Volpin, 2005). Today, the size of a country’s level of information technology input could be equated to the level of economic growth and the subsequent size of that country’s economy. It is therefore important that various countries continue to plan ways of improving and bettering their information technology competitiveness in order to remain competitive in modern economic competition (Pasiouras, Gaganis and Zopounidis, 2008). But to be competitive, there are key public strategies and policies that need to be considered in the field of information technology. In this essay, Taiwan is used as a case study of a highly performing information technology competitive country among sixty six (66) other countries that were ranked by the Economist Intelligence Unit (EIU). The inputs that went to getting Taiwan this enviable place of 13th that puts it ahead of countries like South Korea and Japan are examined to the latter using Porter’s Diamond Model. The analysis is also expanded to include ways by which the country can maintain its position or better it as well as ways of avoiding the unlikely event of losing out on its position. At the end of the paper, the writer hopes to achieve the objective of clearly outlining the national information and communication technology strengths and weaknesses associated with various countries in comparison to Taiwan to see how Taiwan could be used as a model especially when it comes to the area of electronics and semiconductor development. Overview of the IT Competiveness Index The IT Industry competitiveness index is generally in place as a scale for finding out how various countries are performing in terms of the application of information technology into industrial growth. To this end, several indicators are used to find out how sixty six (66) selected countries are competing among themselves in the various areas of indicators. The index was first published in 2007 (Rad and Beek, 2009) and had 26 of the said indicators grouped into six major categories for scoring. After scoring is done in the various categories, the accumulated score determines the place of various countries. This implies that the IT Industry Competitiveness Index is highly quantitative, making it empirical and open to public critique (Roll, 2006). The subsequent advantage that comes with this provision is that the index is generally tagged as credible; even considering the fact that it is hosted by none other quarters than the Economists Intelligence Unit with support for BSA. The various categories are given different weightings according to the impact that each of them makes towards information technology enhancement. The six major categories and their corresponding weightings are presented below. Category Weighting Overall business environment IT infrastructure Human capital Legal environment R&D environment Support for IT industry development 10% 20% 20% 10% 25% 15% Total 100% Source: The Economist Intelligence Unit Limited, 2011 Factor Conditions Analysis of Taiwan’s Performance The chat bellow gives a detailed and graphical representation of the performance of Taiwan in the 2011 IT Competitiveness Index. From the graph presented above, it can be seen that Taiwan scored more than half of available score of 100% in all six categories. The highest performing scores were however recorded in business environment and legal environment, which scored 86.5% and 74.5% respectively. This means that Taiwan as a country has created an enabling business environment that makes the country highly attractive to investors, both home and abroad. As the investors do business in the country, they are assured of sound legal backing that is free from all forms of intimidation biases in rulings. Indeed, R&D environment, which scored 69.9% is also commendable just as support for IT industry development, which scored 61.4%. This notwithstanding, given the fact that the IT development is seen as the fulcrum of business growth, it is expected that the country would do more in this area in subsequent years. IT infrastructure and human capital scored the lowest with marks of 54.1% and 53.7% respectively. Demand Conditions Factors accounting for IT Competitiveness Growth in Taiwan Of the six categories that are used in the rankings for various countries in terms of their ratings on the IT Industry Competitiveness Index, Taiwan’s two highest scoring categories were Business Environment and Legal Environment, which scored 86.5% and 74.5% respectively. This means that the business environment of Taiwan is highest robust against major economic shocks, part of which was the global economic meltdown that plagued the global economy not long after the current rating was done. The business environment of Taiwan is also rapid in terms of growth (Glavinich, 2007). Research has showed that one major advantage that comes with the Taiwan strategy of business growth is that the country operates a concentrated business model whereby much attention is given to selected few areas instead of the country trying to be a ‘jack of all trade’ (Castaneda and Nahavandi, 2011). By this, reference is being made to the fact that Taiwan pays particular attention to the electronics and semiconductor industries. As these industries flourish, the country continues to make strives of ensuring that business operatives are well protected with a well consolidated legal system (Chen and Silverthorne, 2005), which is enviable to all other competitors. Related and Supporting Industries As the achievements of Taiwan are being praised, it is important to point to some of the major challenges that have hampered an even more impressive performance by Taiwan. It is believed that outlining such challenges will serve as a focal point for the country to pay much attention to in its bid to improving its current performance. The first of such challenges has to do with the problem of brain drain or intellectual migration. By this, reference is being made to the fact that Taiwan continues to be ranked as one of the worse scenarios of mass graduate migration (Chen and Chen, 2008); a situation that continues to deplete the human resource base of the country. It should not be surprising even then that in terms of human capital; the country scored one of the lowest marks. But for the fact that most graduates of the country would travel outside the country to seek greener pastures, there would have been a more consolidated human capital to lead the IT industry development agenda. Another challenge has to do with high cost of starting business, which has been a disincentive for most young people to venture into entrepreneurship in Taiwan. but for this situation, there would have more IT industries in Taiwan with particular emphasis on the development of the electronic and semiconductor industries. Firm Strategy, Structure, and Rivalry Even though Taiwan was ranked ahead of some key competitors like South Korea and Japan, it is important to note that there were areas within the categories that these other countries performed better than Taiwan. The implication here is that there is still room for improvement if Taiwan wants to maintain its position to better its current position. One of the very first things that the country is expected to do in its long term economic planning to improve its existing IT competitiveness is to give much focus to private sector research and development spending. It will be noted that regardless of the fact that Taiwan was ranked ahead of Japan and South Korea, Japan scored 79% in research and development environment with South Korea scoring 78.5% in the same area (The Economist Intelligence Unit Limited, 2011). This means that both countries did better than Taiwan in research and development. Meanwhile, the public sector of Taiwan has been identified to be lacking in needed human capital and infrastructure to lead the research and development agenda (Hilgerman, 2008). It is not surprising therefore that in the areas of human capital and IT infrastructure, the lowest scorings were recorded for Taiwan. It is against this backdrop that the private sector has been suggested to take up research and development spending in Taiwan. Secondly, the level of innovation and entrepreneurialism that exists in Taiwan is admonished to be improved. As a country, Taiwan must begin looking at ways of resourcing and encouraging its human resource base to be productive in their own means by taking up to innovation and entrepreneurship. Once this happens, general productivity will go up because as much as the raw human resource will be contributing to the economy and also be making their own earnings out of their contributions made, they will also be empowered to be creating new avenues of jobs where new sets of productivity ventures will be created (Porac et al, 2013). For this to happen, the public sector through the government must be seen to be creating an enabling environment for young entrepreneurs to spring up. Some of the ways that this can be done so easily is through the provision of accessible and flexible loans for business creation, nurturing and maintenance. Innovative individuals who excel in their business ventures must also be encouraged through government assisted supports and sponsorships for expansion of their ventures. Benefits of IT Competitiveness to Taiwan As Taiwan has been ranked as one of the best performers in Asia and its economic region as a whole, there are number benefits that this ranking will bring to the country. In the first place, it is expected that Taiwan will be seen as a highly lucrative business destination for all investors, especially those in foreign lands. What this means is that the IT competitiveness of the country is going to open doors for the country to get numerous foreign direct investments (Avery, Chevalier and Schaefer, 2008). The major driving force that is likely to ensure this is the fact that the country had a very good score in general business environment and legal environment, who of which factors are highly considered by investors who want to ply their businesses outside their home lands (Ayber and Ficici, 2009). With such a credible source as the Economist Intelligence Unit scoring Taiwan as the 13th best in IT competitiveness, investors are going to be rest assured the political, economic, social and technological environments to do business in the country are all going to be favorable and that they are going to get a very fair legal basis for their legislative representations (Besanko and Kanatas, 2006). Apart from the benefits that are going to come as a result of gaining foreign direct investment, the ranking is also going to serve as a yardstick for the country to have a forecasted strategic plan into the development of its overall economic restructuring process. It will be noted that the boost that information technology has brought in the creation of globalization has made the world a highly competitive place to live. Experts have actually said that the economic competitions that exist among countries of the world are going to increase and for countries to remain onboard the competition, they need not just a short term economic survival plan but a long term one as well (Bessler and Murtagh, 2002). This means that as the ratings keep coming by the years, Taiwan is going to be offered the opportunity of knowing key areas or categories of its IT industry support that needs to be restructured in relation to other competitors. As these surveys and understandings are made, the long term impact is that a framework of long term strategic focus is going to be built. In essence, the ratings for Taiwan will set the pace for long term planning to be possible. Conclusion The future is very bright for Taiwan and all other countries as far as they are ready to continue pursuing the information technology agenda. This conclusion is made against the backdrop that information technology continues to be the most important and influential factor that affects the way business is conducted in today’s economic climate. Through information technology, production is increased and thus productivity is efficient and effective (quote). With information technology also, there are several avenues presented for producers to trade out their products to potential customers. With Taiwan, the country it admonished to continue its national strategic policies on specified information technology development whereby the current emphasis is on the electronic and semiconductor industries. This conclusion is made because focusing on this area alone will enable the country to master out on all possible knowledge and skill needed to continuing making it a global leader. As a global leader in these industries, there is a higher probability that most countries will prefer using Taiwan as a destination for conducting all forms of electronic and semiconductor business. The country should however be ready to continue investing in research and development as a means of finding ways of enhancing its current place on the world economic map so that it becomes more competitive with other recognized countries. REFERENCE LIST Avery C., Chevalier J. A. and Schaefer S. 2008, "Why Do Managers Undertake Acquisitions? An Analysis of Internal and External Rewards for Acquisitiveness." Journal of Law, Economics and Organisations, Vol. 14, pp. 24-43 Ayber B. and Ficici A. 2009, "Cross-Border Acquisitions and Firm Value: An Analysis of Emerging-Market Multinationals." Journal of International Business Studies, Vol. 40, pp. Besanko D. and Kanatas G. 2006, "The regulation of bank capital: Do capital standards promote bank safety?" 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