Wednesday, August 05, 2009

Silliness on Nortel-Ericsson

Stephen Gordon comments on some comments on the Ericsson purchase of some Nortel assets. I have commented earlier, but he is more of an expert and a lot more forceful.
His very well argued bottom line:

Right there, we see why no Canadian in their right mind would spend much time or effort doing R&D: they know that the best price they can ever get is one offered by other Canadians. And this price is always going to be lower than what other innovators in other countries can expect to receive.
Worse, this also means that Canadian bidders can knowingly low-ball when they make their offers for Canadian-born intellectual property. Why didn't RIM outbid Ericcson? Because they know that they could bid low, invoke patriotism and still get the assets at a discount?
If we want Canadian firms to start thinking that R&D and innovation are things of value, perhaps we should disabuse them of the notion that they can be had on the cheap.

A key point is that the problem here is all caused by some stupid government wish to intervene that adds zero value to any part of the universe except for the holders of the power the law creates, and those who can capture them through rent-seeking.
I personally also have no idea how it is decided what firms are 'Canadian' and not. Nortel was owned by a collection of shareholders, as was my own, in both cases dispersed around hte world. The location of corporate headquarters is hardly a major issue, as I suspect both companies had (well, my former employer still has) assets all over the world.
I worked with Nortel, occasionally with people located in Ottawa, but also with people located in Texas. (They were more fun.)


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