Showing papers on "Intangible asset published in 1998"

Exploring the brand value-shareholder value nexus for consumer goods companies

Abstract: It is generally claimed that brand names are a corporate asset with an economic value that creates wealth for a firm’s shareholders. However, the scholarly literature has neither provided a comprehensive theoretical basis for this claim nor documented an empirical relationship between brand value and shareholder value. This exploratory study describes a rationale for, and documents, the statistical strength and functional form of a brand value-shareholder value relationship for publicly held consumer goods companies in the United States. A theoretical argument supportive of a positive relationship between a firm’s accumulated brand value and market-to-book (M/B) ratio was empirically validated. However, even though firms with higher accumulated brand values have higher M/B ratios, the functional form of the relationship was found to be concave with decreasing returns to scale. Theoretical and managerial implications of these findings are outlined, as well as study limitations and directions for future research.

The Demand for Branded and Unbranded Products—An Econometric Method for Valuing Intangible Assets

Abstract: In this chapter I consider the economic value of certain intangible assets such as trademarks and brand values. Specifically I develop an economic analysis to estimate the values for five trademarks of the Carnation Company circa 1985—Coffee-mate, Carnation Evaporated Milk, Carnation Instant Breakfast, Mighty Dog (dog food), and Fancy Feast (cat food). These five brands were among Carnation’s best known brands; each has a relatively large market share, and each commands a price premium relative to its unbranded competitors.

The multinational enterprise as a learning organization

Abstract: According to top managers of multinational enterprises (MNEs) and the applied international management literature studies of their strategy and organization, a unique benefit that these firms seek to obtain from their multinational reach is a richer learning experience about products, processes and organizing principles.1 A major challenge is how to structure themselves to learn what is best for all their operating units and to diffuse what is learned in one part of the organization to other parts.

R&D Inter-firm Agreements in Developing Countries. Where? Why? How?

Abstract: Foreign investments and inter-firm contractual agreements are the main channels for the diffusion of technologies towards Developing Countries (LDCs). The literature on the determinants of multinationals is very broad and mostly revolves around Dunning’s ‘eclectic theory’ (Dunning, 1981). Multinational activity is the combined result of the OLIs triade: ownership, localisation and internalisation factors.

The Benefit of a Good Reputation: An Empirical Analysis

Abstract: INTRODUCTION Like individuals, organizations are identified in part by the value of their good name. There is growing recognition in the business community that managerial considerations of reputation are no less significant than those involved with corporate operational, financial and legal decisions. Although a number of studies have addressed ways in which organizations might build a good reputation, the consequences of corporate reputation have been less well examined empirically. What is the value of a solid reputation once secured? It has been suggested that reputation can serve as something of a reservoir of goodwill, both in the accounting sense (where reputation is assigned a dollar value when a firm is sold, note Davis, 1992; Bromley, 1993, citing Davis, p. 166), and in a public relations sense, where it is implied that communities will tend to give highly reputable firms the "benefit of the doubt" (Bostdorff & Vibbert, 1994; McGuire et al., 1988 [by implication], Patterson, 1993; Sobol et al., 1992). This study examines the increased importance of corporate reputation by empirically testing the premise that a good reputation serves as an intangible asset which can help protect the organization in times of corporate crises--in public relations terms, the "reservoir of goodwill" presumption. RESEARCH QUESTION For our purposes reputation is operationalized using the Fortune's "most admired corporations" survey rating. The crisis, or the event from which the buffer is to protect the company, is more difficult to select. While it would be interesting to study the impact of corporate reputation on disasters such as the Valdez spill or Tylenol tampering, these disasters are not comparable. They were unique and basically affected one company, or in the case of Alar, only a few companies. What is needed for the purposes of this analysis are instances where a general, unpredicted distress affected a large number of major corporations within a very narrow time frame. Additionally, such incidents must have occurred between 1982 and the present, which is the range of the corporate-reputation data set. Given these parameters, this study will examine three significant one-day stock market declines that have occurred in the past 15 years: October 19, 1987 (508 points, or 22 percent of value), October 13, 1989 (190 point drop, or 7 percent of value); and March 8, 1996 (171 points, 3 percent). Despite the wide range in percentages, all three events were among the top ten most significant point drops in the stock market of the past 15 years, as measured by the Dow Jones Industrial Average (Kansas, 1996). The selection of these three events will allow for determination of reputation effects across a range of decline severity. The final measurement issue concerns the actual degree of economic harm suffered by the 250-350 companies in this study relative to their respective reputations. This will be determined by percent change in stock price. It is essential to note that the corporate reputation composite index is constructed from eight attributes (described below), only three of which are purely financial in nature (e.g., "financial soundness"). Furthermore, Fortune survey respondents consist of over 8,000 managers and analysts, who rate each company in their area of expertise according to their perception of that corporation. Therefore, as reputation is largely perceptual in nature, based on more non-financial than financial criteria, using stock prices to measure the concept of buffering while operationalizing economic shock as a general but severe decline in the market provides a meaningful degree of separation between event and effect. The question is: Can reputation serve to protect a company against short-term economic loss in the event of a major, sudden, general economic shock (in this case a major stock market crash or decline)? LITERATURE REVIEW AND HYPOTHESES The importance of reputation as an area of inquiry is underscored in the literature by its numerous suggested benefits. …

On the disclosure and capitalization of research and development spending: some empirical observations for Flanders

Abstract: In the US, FASB NR 2 demands the full expensing of R&D costs because they would not contribute to future earnings In Europe, however, article 37 of the Fourth European Directive allows companies to capitalize their costs of R&D as an intangible asset or to expense them immediately in their income statement The paper exploits this difference and tries to analyze empirically which factors determine the reporting choice made by firms in Europe More specifically, we analyze the capitalization as well as the disclosure decision of 321 Flemish firms, who are actively performing R&D activities Company information from their financial statements is combined with privately held data on the size and nature of their R&D-activities The disclosure decision is analyzed separately from the capitalization decision Only 30 % of the 321 R&D active firms in the sample disclosed the amount of R&D spent in their financial statements About 70 % of those firms disclosing choose to capitalize The empirical results show that the disclosure decision is determined by the R&D characteristics as well as by the financial performance of the firm The probability that a firm discloses its R&D-expenses is increasing with its R&D intensity, the existence of an R&D-department and cooperation with universities or other firms The current as well as the long term financial performance are also relevant for the disclosure decision Once the firm has decided to disclose its R&D-expenses, the decision to capitalize these expenses is mainly determined by the financial performance If firms can not repay part of their debt and if stakeholders do not receive a sufficiently high income, firms are more likely to capitalize their R&D costs When the group of capitalizing firms is compared to the group of expensing firms, whether disclosing or not, our results suggest that the R&D intensity, at least in highly innovative industries, and the financial performance determine the capitalization of R&D expenses Our results suggest that the expenses of successful R&D activities are more likely to be capitalized as an asset in the balance sheet

Evaluating tangible asset investments: the value of cross functional teams

Abstract: Criticizes the attitude of separatism used in evaluating management performance. Asserts that looking at narrow functional areas does not provide a holistic picture of an organization, for example, production may reduce its costs by using inferior quality materials but marketing and sales may not be able to sell the product so their performance declines. Suggests that some organizations suffer from conflict between functional areas because they are evaluated on the outcomes from activities they control, affecting overall organizational performance. Indicates that asset investment decisions should be based on the interdependent relationship between accounting, finance and marketing departments, and that this can best be achieved if a cross‐functional team makes the asset investment decisions. Points out the inherent difficulties in evaluating intangible assets. Focuses on advertising and research and development (R&D) and how investments could be evaluated using functional and cross‐functional teams, based on financial data (on 126 firms) accessed from the Compustat PC Plus database. Takes a look at economic value‐added, which questions the differences between the accounting and economic models of a firm. Uses regression analysis to examine the impact of advertising, R&D and other explanatory variables on market value, accounting profitability and sales. Finds support for using cross‐functional teams in evaluating intangible asset investments. Recommends areas for further research.