Determinants of the valuation of intangible assets - a contrast between Taiwanese and American IC design houses

Abstract

The industry of IC design is asset-light but knowledge intensive and high value added. We undertook research to understand how US and Taiwan IC design houses evaluate their intangible assets, and what factors drive the value. The results show that the values of US IC design houses are higher than those of Taiwan by market capital methods. By contrast, the values of Taiwanese IC design houses are more consistent those of US firms using asset return methods. We then constructed 26 items from financial and intellectual capital aspects, and ran a factor analysis that returned eight main attributes of intangible value. Results of stepwise regression indicated that current profitability is the most important predictor of intangible value for Taiwan companies, whereas R&D productivity is the most important driver for US firms. These findings suggest that US design houses are more long-term focused in their operations than their Taiwanese counterparts.