Kurzexposé zum Promotionsvorhaben von Emre Gömeç
Innovation and Financialization of Enterprise: The Case of Two European Technology Giants
NOKIA and Ericsson
The information and communication technologies (ICT) sector has undergone massive technological change over the past two decades. Additional to the technological improvement, starting from the U.S to the European countries, companies have changed strategy to allocate resources to investments, the organization to transform technologies and access new markets and financial commitment to sustaining the process of developing technologies. Theory of maximizing shareholder value (MSV) is at the core of this transformation. Therefore, this situation pushed attention of publicly traded firms to short-term stock exchange value rather than the quality of the goods and services they provide and long-term goals. In this process, new firms and new subsectors within the ICT sector have emerged, while some sectors and well-established, “old” firms, mostly European and North American companies, disappeared or lost market shares against “new” U.S and non-financialized Asian companies, such as Huawei. NOKIA is one of the examples that lost the market share after 2008.
In this dissertation, damaging and transforming influence of financialization on the long-term innovative capabilities will be explained, two European ICT companies with the similar Scandinavian institutional background, NOKIA and Ericsson, will be compared. NOKIA had focused on mobile communications sector after 1992 and dominated the mobile handset market in 2008. However, US firms involved in the mobile market and changed the market structures. Additionally, and most importantly, NOKIA engaged in share repurchases between 2000-2010, especially between 2003-2008, when its decline started. On the other hand, Ericsson’s development is stable in this period. The company kept its market share successfully when NOKIA and Motorola dominated the mobile telecommunication market and the downturn of internet boom hits the market. Furthermore, it strengthened its position in 3G and IP Network in order to benefit of Apple’s iPhone “revolution”. Contrary to NOKIA, although Ericsson, shares some part of its profit to shareholders by dividends, it has never engaged in the stock buyback. This situation provides a necessary base to analyze how financialization can influence resource-allocation decision and its firm-level outcomes.