2. The diamond model: Porter’s explanation of determinants of national competitiveness From Mike Porter’s The competitive advantage of nations. Chance Factor Conditions Demand Conditions Structure of firms and rivalry CSAs in certain industries/products

3. Quiz #6 1. We see a rising quantity in all of the following conditions, which one does NOT increase the survival of a foreign business entry?  [A] Number of suppliers in the factors market.  [B] Purchasing power of customers.  [C] Market concentration by existing rivalries within our focal industry. 2. Which of the following statements about how we use diamond model analysis for location choice is INCORRECT?  [A] We need to know the initial conditions/characteristics of alternative locations.  [B] We choose the location that changes in the direction of improving the locational advantages.  [C] We choose the location with the best final conditions/characteristics after changes. 3. Which of the following statements would LEAST LIKELY suggest that we should adopt a multi-diamond model compared to a single diamond model?  [A] Major customers are located outside the country where the products/services are made.  [B] The cluster is part of a regional free-trade agreement.  [C] The cluster is connected through efficient transport and communications with other countries.  Please send your answers to my graduate assistant Matthew Ashman (mashman91@gmail.com) and cc me (zchen23@uncc.edu) by 8pm.

4. What to do tonight?  How would international operations affect your diamond model?  An example of cross-border acquisitions for innovation  Meet and talk with Damon Gregoire (Executive VP, M&As, 3D Systems) on Cross-border M&As of 3D Systems as a case study  Depending on the time left, discussion on your last assignment and final project

5. Cross-border acquisitions for innovation: Impacts on acquirers and targets DR. VICTOR Z. CHEN UNC CHARLOTTE

6. Global value chain curve  Source:  http://www.brookings.edu/~/media/events/2010/6/09%20china%20global/20100609_ china_global_steinfield.pdf http://www.brookings.edu/~/media/events/2010/6/09%20china%20global/20100609_ china_global_steinfield.pdf Source: Ye, Meng, & Wei (2015)Ye, Meng, & Wei (2015)

7. Global value chain curve  Source:  http://www.brookings.edu/~/media/events/2010/6/09%20china%20global/20100609_ china_global_steinfield.pdf http://www.brookings.edu/~/media/events/2010/6/09%20china%20global/20100609_ china_global_steinfield.pdf Source: Ye, Meng, & Wei (2015)Ye, Meng, & Wei (2015)

8. MOTIVATION BEHIND INTEGRATION A value-chain-based view Moving up in the value chain Economies of scale Economies of scope (difficult to coordinate)

9. What was the motivation behind this? the sale of Motorola’s home business, cash on hand, deferred tax assets and the $2.91 billion Google received from Lenovo mean that in the end, Google paid less than $3.5 billion for Motorola’s patent portfolio, which it retained after the sale.

10. What would be an ideal environment under the diamond model for R&D? Chance Factor Conditions Demand Conditions Structure of firms and rivalry CSAs in certain industries/products

11. What if no single country/location has all the ideal conditions, which is almost always the case? Varieties of capitalism/Comparative advantages of nations Chance Factor Conditions Demand Conditions Structure of firms and rivalry CSAs in certain industries/products

12. Cross-Border Acquisitions Corporate R&D has become overwhelmingly global. According to the Strategy + Business 2015 Global Innovation Survey, 94 percent of the world’s biggest innovators now conduct parts of their R&D programs abroad.

13. Major impacts of cross-border acquisitions on innovation activities/R&D. Chance Factor Conditions Demand Conditions Structure of firms and rivalry CSAs in certain industries/products Shareholder activism for shorter-term returns Stronger minority shareholder protection laws R&D resources in the other firm & nation Strong IPR protection Tech infrastructures in the other nation

14. The Literature (continued) Source: Szucs, Research Policy, 2014 Since Hitt et al (1991) there have been a relatively small number of studies addressing the question of post-acquisition R&D, and the evidence is mixed. None examine both acquirers and targets, and none clearly distinguished between the managerial diversion argument and the knowledge transfer argument.

15. My working study Chen, Li, Shapiro, 2016  I have examined a sample of 249 cross- border acquisitions from 43 home countries into 47 host countries between 1990-2010. I kept the R&D levels throughout the period between 5 years prior to and 10 years since an acquisition.  See the patterns (right) before controlling for a series of intervening factors

16. My working study (cont’d) Chen, Li, Shapiro, 2016 Target R&D, Last year Target R&D Acquirer R&D, Last year Acquirer R&D -5 -4 -3 -2 -1 0 (Acquisition) 1 2 3 4 5 6 7 8 9 10 Controlling for a series of potential major intervening factors <1 >0

17. My working study (cont’d) Chen, Li, Shapiro, 2016 Ln(Acquirer R&D) Ln(Acquirer R&D, Last Yr)0.630*** (0.016) Ln(Acquirer R&D, Last Yr) x Short-Term after Deal (≤2 Yrs)-0.082* (0.038) Ln(Acquirer R&D, Last Yr) x Long-Term after Deal (>2 Yrs)0.061* (0.026) Ln(Target R&D, Last Yr)-0.024 (0.042) Ln(Target R&D, Last Yr) x Long-Term after Deal (>2 Yrs)0.103* (0.047) Ln(Acquirer Assets)0.065* (0.028) Ln(Acquirer Employment)-0.324 (0.239) Ln(Acquirer Prior M&As)-0.070 (0.086) Home Industry Competition, SIC40.637 (0.451) Ln(Home GDP)1.508* (0.682) Ln(Home Per Capita GDP)-2.034* (0.904) Industry Relatedness0.020 (0.142) Shares Acquired in M&A-0.004+ (0.002) Home-Host R&D Intensity Gap-0.704*** (0.103) Short-Term after Deal (≤2 Yrs)1.132** (0.393) Long-Term after Deal (>2 Yrs)-0.556* (0.271) Constant-6.784** (2.578) Home country effects Controlled Acquirer Industry effects (SIC1) Year effects Ln(Target R&D) Ln(Target R&D, Last Yr)0.545*** (0.021) Ln(Target R&D, Last Yr) x Short-Term after Deal (≤2 Yrs)-0.141** (0.048) Ln(Target R&D, Last Yr) x Long-Term after Deal (>2 Yrs)-0.210*** (0.032) Ln(Acquirer R&D, Last Yr)0.077* (0.036) Ln(Acquirer R&D, Last Yr) x Long-Term after Deal (>2 Yrs)0.010 (0.042) Ln(Target Assets)0.063* (0.026) Ln(Target Employment)-0.185 (0.203) Ln(Acquirer Prior M&As)0.225 (0.175) Host Industry Competition, SIC4-0.018 (0.424) Ln(Host GDP)-0.624 (0.444) Ln(Host Per Capita GDP)0.589 (0.608) Industry Relatedness-0.326* (0.158) Shares Acquired in M&A-0.002 (0.002) Home-Host R&D Intensity Gap0.407*** (0.110) Short-Term after Deal (≤2 Yrs)0.671+ (0.405) Long-Term after Deal (>2 Yrs)1.005*** (0.276) Constant3.425+ (1.969) Host country effects Controlled Target Industry effects (SIC1) Year effects

18. My working study: Simulation, assuming Acquirer & Target had the same pre-deal R&D 1.In SR, R&D in both Acquirer and Target declines, but more so in Target. 2.In SR, R&D of Acquirer positively affects R&D of Target, but not the other way. 3.In LR, R&D in Target continues to decline, whereas reverses in Acquirer. 4.In LR, R&D in Target positively affects R&D of Acquirer, more so than the other direction. 5.Overall, R&D in Acquirer eventually increases over the LR, but consistently declines in Target.

19. Further questions  What about post-entry R&D integration and management? Relocation vs. co-development?  What about MNEs with multiple targets/subsidiaries/host countries?  What about MNEs with a complex mix of multiple technologies and new product developments?

20. Today’s case: 3D Systems Background  About 3D Systems  3D Systems provides comprehensive 3D products and services, including 3D printers, print materials, on- demand parts services and digital design tools. Its ecosystem supports advanced applications from the product design shop to the factory floor to the operating room.

21. Today’s case: 3D Systems Background

23. 3D Systems Subsidiary%Nation 3D Systems Asia-Pacific Pty Ltd100%Australia LayerWise NV100%Belgium Robtec Brazil100%Brazil Robtec Design100%Brazil Robtec Imprima100%Brazil 3D Canada Company100%Canada Cimatron Technologies, Inc. (Canada)100%Canada Cimatron (Beijing) Technologies Co. Ltd.100%China (Peoples Rep. Of) Cimatron (Guangzhou) Technologies Co. Ltd.100%China (Peoples Rep. Of) Geomagic (Shanghai) Software Co., Ltd.100%China (Peoples Rep. Of) 3D Systems France SARL100%France Phenix Systems100%France Sint-Tech100%France Cimatron SARL100%France Co-Web100%France 3D Systems GmbH100%Germany Cimatron GmbH100%Germany Geomagic GmbH100%Germany Cimatron Technologies India Pvt. Ltd.100%India Three D Sycode India Private Limited100%India Cimatron Ltd.100%Israel Simbionix Ltd.100%Israel 3D Systems Italia S.r.l.100%Italy Microsystem srl100%Italy Provel, S.r.l.100%Italy 3D Systems Japan K.K.100%Japan Cimatron Japan Co. Ltd.100%Japan 3D Systems Korea, Inc.100%Korea (South) Korea Cimatron Technologies100%Korea (South) Robtec Mexico100%Mexico 3D Systems Benelux100%Netherlands Freedom of Creation B.V.100%Netherlands LayerWise Nederland BV100%Netherlands 3D Systems S.A.100%Switzerland 3D Systems Europe Ltd.100%United Kingdom 3D European Holdings Ltd.100%United Kingdom Bits From Bytes, Ltd.100%United Kingdom botObjects Ltd100%United Kingdom Cimatron UK Limited100%United Kingdom CRDM, Ltd.100%United Kingdom Robtec Uruguay100%Uruguay 41 (wholly owned) foreign subsidiaries in 17 foreign countries

24. Guest today  Damon Joseph Gregoire has served as Executive Vice President, Mergers & Acquisitions of 3D Systems Corp. since November 11, 2014. Most recently, Mr. Gregoire served as Senior Vice President and Chief Financial Officer of 3D Systems until November 11, 2014. He joined 3D Systems as Vice President and Chief Financial Officer on April 25, 2007. Mr. Gregoire has served as Vice President, Finance of Infor Global Solutions, Inc., an international software company, since April 2006 with responsibility for its Datastream Systems and Customer Relationship Management divisions. He previously served as Corporate Controller of Datastream Systems, Inc., a software company, from 2005 until it was acquired by Infor Global Solutions, Inc. in March 2006. From 2001 to 2005, Mr. Gregoire served as Director of Accounting and Financial Analysis of Paymentech, L.P., an international credit card processing company.

25. Some topics 1) What are some of the major M&A deals 3DS did in the last few years? What were the purposes behind these deals? 2) How can M&A across the world boost innovation and R&D capacities? 3) What are some of the major strategies to foster innovation/R&D capacities through M&As? 4) What are some of the major challenges when such processes are across countries? 5) Do we, how do we integrate, innovation/R&D capacities through M&As? 6) What is 3DS’ new strategic focus given its new leadership? How do M&As continue to advance this strategic focus?