Chinese researchers put value on ideas

Chinese researchers at the University of Oxford have developed a novel way to determine the value of innovative technologies used in information and communications, offering a potential decision-making tool for investors.

The researchers created a database that matched all of the United Kingdom's startups in the ICT sector for less than five years with records of patents granted in relevant technology fields by the world's major patent-granting offices. The years searched stretch from 2006 to 2015. The database matched more than 1,500 patents to 143 companies.

The project was led by Professor Fu Xiaolan and Dr Li Shaomeng of Oxford's Technology and Management Centre for Development, in collaboration with Ai Chao, Huawei's head of Early Stage Investment, R&D.

"The model has already proven itself to have a highly accurate predictive power, especially for technologies at an early stage of commercialization," said Fu. "It also uses completely objective data, which is a significant improvement on existing methods."

Current techniques, based on past financial investment and subjective assessments, do not reflect the value of creativity and novelty and offer poor predictive power, the researchers said. The new method explained 85 percent of the variation in the value of technologies owned by the startups in the database.

It was also tested on Deepmind, the company that created AlphaGo and was later acquired by Google. Using the model, the estimated value of Deepmind was put at between $590 million and $660 million. Google paid $650 million to acquire Deepmind in January 2014.

In June, the research was named Best Paper by the Innovation Strategic Interest Group at the 2017 European Academy of Management Annual Conference.

Noting that the volume of Chinese outbound mergers and acquisitions in the high-tech industry had been growing rapidly in recent years, Fu said the tool is likely to be extremely useful in providing a "reference point" for Chinese buyers, because one of the biggest challenges during takeover bids has been the accurately calculated value of the target company.

Acquisitions in the Chinese high-tech sector reached a total of $203.51 billion since 2014, among which 17 percent were cross-border takeovers of foreign firms by Chinese companies, a total of $34.60 billion, according to the latest report from Thomson One, an arm of Thomson Reuters.