Descriptive statistics

Table 4.1 reports descriptive statistics for firm performances, R&D intensity and control variables for all firms-years by each region and each two-digit SIC code industry (Table 4.2) for each region separately. Conforming to analyze financial statement data, the most extreme observations with Tobin’s q and ROA outside of three standard deviations of the mean are deleted in order to mitigate the influence of outliers.

In Table 4.1, the mean (median) Tobin’s q of Asia Pacific firms in our sample is 0.87

(0.68), compared to 1.25 (0.73) for Europe firms and 1.62 (1.02) for the North America firms.

It is obvious that these variables are significantly different from each other. However, the mean ROA of the North America firms is -0.01. Both Asia Pacific and Europe samples have a significantly higher mean ROA: 0.03 for the Asia Pacific and 0.02 for the Europe. In Table 4.2, on average, the Tobin’s q of the three high-tech industries in North America firms are greater than the same SIC code industry in Europe and Asia Pacific, but there are different results on ROA.

It is interesting to note that the higher q and the lower ROA among the three regions. This is especially noteworthy in the case of North America, the negative ROA but the highest q, implies that short-term profitability for the stock market investors in North America is not the key consideration in the market valuation of high-tech firms. However, the lowest q but highest ROA in Asia Pacific, indicate investors are more conservative with firm long-term profitability, even if firms, on average, have the highest short-term profitability.

Here are two figures which show two dynamic firm performances in three high-tech industries for each region separately during 1996 to 2002. Figure 4.1 summarizes the average Tobin’s q of the three high-tech industries in three geographical regions. We find that during the sample period mean annual Tobin’s q of the North America firms have substantially outperformed those of other Asia Pacific firms as well as those of the continental European firms (Except in 2000). Figure 4.2 shows the average ROA of the three high-tech industries in three geographical regions. However, it is interesting that the results of average ROA during the sample period are contrary to those of the average Tobin’s q in three geographical regions, Asia Pacific firms have substantially outperformed those of other firms in Europe and North America.

These results also show some other notable difference among Asia Pacific, Europe and North America.

1. North America (13%) high-tech industries appear to place more emphasis on R&D activity (R&D intensity) than Asia Pacific and Europe (3% and 7%). It is clear that these variables are also significantly different from each other (Table 4.1). In Table 4.2, R&D activity is relatively concentrated in SIC 36 industries, whereas more broadly dispersed across both SIC 28 and SIC 35 industries among the three regions. From Figure 4.3, R&D activities in Europe and North America are the rise continues throughout the seven years.

However, it is no markedly change in each year in Asia Pacific.

2. Asia Pacific firms show higher value for Firm size and Leverage (Table 4.1). Due to industry characteristics, Chemicals industries, on average, have the highest Firm size and Leverage among the three regions (Table 4.2).

3. In Table 4.1, though the descriptive statistics show that Growth do not differ much from each other, on average, North America firms have a higher growth in sales than that of Asia Pacific and Europe firms. In Table 4.2, Electrical & Electronics industries, on average, have a higher Growth among the three regions.

4. Finally, looking at the capital intensity of the Asia Pacific, Europe and North America firms in Table 4.1, we observe that the North America firms have significantly lower values than the Asia Pacific and Europe firms.

Table 4.1 All Firms-Years by Region

Descriptive statistics for study samples of three high-tech industries in Asia Pacific, Europe and North America from the periods 1996 to 2002.

For all firms-years by region (Table 4.1) and each two-digit SIC code industry for each region separately (Table 4.2). The variables include:

Tobin's q, a firm's market value divided by its replacement cost. Tobin's q is computed according to the methodology presented in Chung and Pruitt (1994). ROA represents the income before extraordinary items divided by total assets. R&D intensity represents the R&D expenditure divided by total sales. Firm size is the natural logarithm of annual assets. Growth is percentage growth rate of total sales. Leverage represents the book value of total liabilities divided by total assets. Capital intensity represents the capital expenditure divided by total assets.

Variables

Asia Pacific (N= 416)

Europe (N= 730)

North America (N= 1,602)

Mean Median S.D. Min. Max Mean Median S.D. Min. Max. Mean Median S.D. Min. Max.

Tobin's q 0.87 (E, N) 0.68 (E, N) 0.82 -0.38 4.40 1.25 (A, N) 0.73 (A, N) 1.62 -0.38 10.98 1.62 (A, E) 1.02 (A, E) 1.90 -0.61 15.61 ROA 0.03 (N) 0.03 0.08 -0.27 0.24 0.02 (N) 0.04 0.13 -0.95 0.34 -0.01(A, E) 0.04 0.22 -1.78 1.63 R&D intensity 0.03 (E, N) 0.01 (E, N) 0.05 0 0.47 0.07 (A, N) 0.04 (A, N) 0.12 0 1.30 0.13 (A, E) 0.06 (A, E) 0.24 0 2.89 Firm size 6.27 (N) 6.19 (E, N) 1.41 2.43 10.14 6.12 5.92 (A) 2.11 1.19 10.77 6.05 (A) 5.99 (A) 1.78 1.43 10.78 Growth 0.13 0.036 0.45 -0.67 3.03 0.11 0.015 (N) 0.65 -0.83 8.78 0.16 0.048 (E) 0.61 -0.92 14.08 Leverage 0.25 (E, N) 0.24 (E, N) 0.15 0 0.69 0.20 (A) 0.18 (A, N) 0.15 0 1.08 0.20 (A) 0.16 (A, E) 0.21 0 2.34 Capital intensity 0.06 (N) 0.04 0.07 0 0.42 0.06 (N) 0.05 (N) 0.05 0 0.53 0.05 (A, E) 0.04 (E) 0.05 0 0.43 Note: Annual data for a seven year period are analyzed. The superscripts A, E and N denote if there are statistically significant differences (at the 5% level) in mean and median values among the Asia Pacific, the Europe and the North America, respectively. We use a two-tailed t-test for means and Wilcoxon signed rank test for medians.

Table 4.2 Three high-tech industries by region

Tobin's q ROA R&D intensity Firm size Growth Leverage Capital intensity Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D. Mean S.D.

Asia Pacific

SIC 28 (N= 93) 0.74

0.53 0.03 0.05 0.01 0.01 6.54 1.25 0.04 0.36 0.29 0.15 0.06 0.05 SIC 35 (N= 165) 0.89 0.92 0.05 0.09 0.02 0.05 6.13 1.44 0.18 0.47 0.18 0.14 0.06 0.07 SIC 36 (N= 158) 0.92 0.85 0.02 0.08 0.04 0.06 6.25 1.46 0.15 0.48 0.29 0.14 0.08 0.07

Europe

SIC 28 (N= 154) 0.77 0.61 0.03 0.07 0.04 0.03 7.55 2.08 0.03 0.23 0.26 0.13 0.07 0.04 SIC 35 (N= 327) 1.12 1.48 0.04 0.11 0.05 0.06 5.68 1.74 0.11 0.75 0.20 0.17 0.05 0.04 SIC 36 (N= 249) 1.72 2.05 -0.01 0.18 0.11 0.18 5.80 2.18 0.17 0.68 0.17 0.13 0.07 0.06 North America

SIC 28 (N= 256) 0.97 0.43 0.04 0.06 0.04 0.15 7.39 1.38 0.04 0.24 0.32 0.19 0.05 0.04 SIC 35 (N= 572) 1.54 1.96 -0.01 0.24 0.11 0.22 6.10 1.75 0.13 0.43 0.19 0.20 0.05 0.04 SIC 36 (N= 774) 1.90 2.09 -0.04 0.23 0.18 0.26 5.58 1.68 0.22 0.78 0.16 0.21 0.06 0.05 Note: SIC 28, Chemicals & Pharmaceutics; SIC 35, Machinery & Computer Hardware; SIC 36, Electrical & Electronics.

2002

Figure 4.1 Average Tobin’s q among the three regions Figure 4.2 Average ROA among the three regions

2002 2001 2000

1999 1998

1997 1996 .2

.1

0.0

Asia Pacific Europe North America

Figure 4.3 Average R&D intensity among the three regions