Appendix. Appendix Chapter 3 Intangible Resources and their Effect on the Internationalization-Performance Relationship 211

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1 Appendix Appendix Chapter 2 The Effect of Context-Related Moderators on the Internationalization-Performance Relationship: Evidence from Meta-Analysis 184 Appendix Chapter 3 Intangible Resources and their Effect on the Internationalization-Performance Relationship 211 Appendix Chapter 4 Intangible Resources and the Internationalization Process: Path Dependence of Building a Profitable Multinational Company 242

2 184 Appendix Chapter 2 Appendix Chapter 2 A 2.1 Studies of the Meta-Analysis 185 A 2.2 Meta-Analytic Procedure and Statistical Formulas 206 A 2.3 Methodological Moderators 209 Table A Independent Variable: Internationalization 209 Table A Dependent Variable: Performance 210

3 The Effect of Context 185 A 2.1: Studies of the Meta-Analysis Author(s) Year Aggarwal, 1979 Research Question(s) Do U.S. investors reward U.S. companies for going overseas? (Relevant) Hypotheses Results Sample Capital markets are not fully integrated on an international level, therefore investors value firms international diversification, because they cannot do so themselves. Internationalization is positively related to Price/Earnings-ratio (P/E-ratio) and negatively to firm beta. Investors are willing to pay a premium for multinationals and systematic risk decreases as firms go international. N=192 U.S. multinationals from Business International. Independent: FSTS, FATA, Foreign income to total income. Dependent: Firm beta, P/E-ratio, Cost of capital. Bloodgood, Sapienza, Almeida, 1996 What are the antecedents and outcomes of the internationalization of new highpotential ventures? How is a firm's decision to internationalize and the subsequent performance affected by its set of resources available? H7: Top management international exposure, sources of competitive advantage, innovativeness, and size at IPO will have the same relationship with subsequent performance as they had with initial internationalization. H8: The level of internationalization of the new U.S. venture at the time of the IPO is positively related to its subsequent performance. Greater international work experience among top managers, pursuit of product differentiation, and larger firm size are strongly associated with greater internationalization of new ventures. Internationalization is marginally related to earnings two years after IPO. Early internationalization is not good or bad but rather contingent upon industry and resource conditions. N=61 venture capital backed firms that were less than five years old at the time of IPO. Variable Coding Independent: Percent of primary activities (according to Porter, 1985) that were at least partially international activities. Dependent: Sales growth, EBIT.

4 186 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Buhner, 1987 Research Question(s) What is the effect of international diversification of firms in Western Germany on market performance? What is the difference compared to a strategy of product diversification? (Relevant) Hypotheses Results Sample Capital market inefficiencies benefit firms that internationalize. Market failure, asset specificity, and indivisible physical assets are further benefits for internationalization. Results show significant positive relationships between geographic diversification and both market performance and accounting performance. While domestic product diversity appears to be motivated by internal "push" stimuli such as risk reduction and poor profitability in traditional lines of business, internationalization appears to be "pulled" by external stimuli of prospective market opportunities. N=40 large West German corporations of the top 300 firms in Western Germany, all stock exchange noted in Frankfurt. Capar, Kotabe, 2003 What is the effect of international diversification on performance in service firms? H: The relationship between international diversification and performance in service firms will be U-shaped curvilinear, with performance decreasing up to a certain point, beyond which higher levels of international diversification will increase performance. H: Supported. Lower inflection point at FSTS = ca. 18%. N=81 major German service firms from the largest 500 German Companies Directory by Die Welt. Variable Coding Independent: Herfindahltype index of international sales dispersion. Dependent: Jensen alpha, ROA, ROE. Independent: FSTS. Dependent: ROS, ROA.

5 The Effect of Context 187 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Chen, Martin, 2001 Research Question(s) When encountering competitive threats, what causes firms to use foreign expansion to overcome the difficulties? How is a strategy of internationalization related to strategies of domestic expansion and product expansion? (Relevant) Hypotheses Results Sample H1: When encountering difficulties, small firms that already have foreign operations are more likely to engage in foreign expansion. H2: Product expansion activities negatively affect foreign expansion of small firms. H3: Domestic expansion activities negatively affect the foreign expansion of small firms. H1: Supported, small firms with prior foreign business involvement are more likely to use foreign expansion to deal with the problems. H2,3: Supported, foreign activities of small firms are closely related to their non-foreign strategies and cannot be considered separate strategic choices. Because of resource scarcity, SMEs should either engage in product or international diversification. N=49 SMEs randomly selected from US electronic components industry (SIC- 36). SME: sales less than the industry average for at least half of the periods. Delios, Beamish, 1999 Is there value intrinsic to a wide geographic scope of operations? Is internationalization per se valuable or are proprietary assets the ultimate source of superior firm performance? H4a: R&D intensity of a firm is positively related to its geographic scope. H4b: Advertising intensity of a firm is positively related to its geographic scope. H5: The geographic scope of a firm is positively related to corporate performance. H4a,b: Supported. H5: Supported. The effect of internationalization and the effect of proprietary assets are separated through a path analytic approach. Ownership advantages as well as internationalization itself lead to superior performance. N=399 Japanese publicly traded firms from Analyst s Guide; firms are listed at the first section of the Tokyo stock exchange. Variable Coding Independent: dummy (0/1) depending on the formation of a new foreign business unit in a year. Dependent: Firm sales change, ROA change. Independent: Index of number of FDI and number of countries. Dependent: ROA, ROE, ROS. All items are 5- year averages.

6 188 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year hanaraj, Beamish, 2003 Research Question(s) What is the relationship between degree of internationalization and firm performance? Are differences between US and Canadian SMEs observable? (Relevant) Hypotheses Results Sample H5: The greater the technological intensity of a firm, the greater the degree of internationalization. H6: The higher the degree of internationalization of a firm, the higher the performance. H5,6: Supported. Enterprise, technological intensity and firm size are good predictors of export strategy and export strategy influences firm performance positively. The path coefficients for American and Canadian SMEs are comparable, except for the path from enterprise to degree of internationalization, where the US sample is not significant. N=70 US SMEs from an industrial midwestern state. N=87 Canadian SMEs from the whole country. Questionnaire survey. Dragun, 2002 What is the impact of international spread ( globalisation ) on financial and value performance? What characteristics do international retailers with corresponding sound financial performance display? What strategic recommendations on the appropriate international expansion mode can be offered? No Hypotheses offered. Higher proportion of international sales leads to lower profitability and lower risk-adjusted cash returns. The more global the company is, the greater its earnings volatility. A "sound financial performance" retailer has the following characteristics: reasonably big, modestly international (FSTS: 18%), regionally focused (1-2 regions), lightly leveraged. N=130 of World's largest 500 retail companies, from 19 countries. Variable Coding Independent: Export intensity, number of foreign countries. Dependent: Profitability, Market share, Market share growth. Independent: IMG - integrative measure of globalization. Dependent: Operating profit margin, Realized economic value.

7 The Effect of Context 189 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Geringer, Beamish, DaCosta 1989 Research Question(s) How can performance differences of MNCs be explained by their diversification strategy and internationalization? How should an MNC deploy its resource base to generate economic rents? (Relevant) Hypotheses Results Sample H2: Relative performance of a MNE will tend to be positively related to the degree of internationalization of the firm's operations. H2: Supported, internationalization enhances performance. N=181 largest American and European multinationals from World directories of multinational enterprises. Geringer, Tallman, Olsen, 2000 What is the relationship between product diversification and performance and internationalization and firm performance over different periods of time for Japanese keiretsu and nonkeiretsu manufacturing firms? H2: Performance levels of Japanese multinational manufacturing firms should vary positively and linearly with the degree of multinationality. H3: Performance levels of Japanese multinational manufacturing firms should vary positively with the level of export sales by the firm from the home country compared with total sales. H5a,(b): The interaction of multinational diversity and product diversity (squared) should be negatively (positively) related to performance for Japanese multinational manufacturing firms. H2: Negative coefficient for the first two periods for ROS, not significant for sales growth in period 2-3. H3: Supported for ROS in first period, not significant in period 2-3. H5a,b: Not supported, signs contrary to those predicted. N=108 largest manufacturing multinationals from Japan in 1981, Data from Daiwa Securities Co., Ltd. Analyst s Guide und Japan company handbook. Timeframe: Variable Coding Independent: Foreign subsidiary sales to total sales. Dependent: ROS, ROA, 5-year averages. Independent: Foreign subsidiary sales to total sales, export sales to total sales. Dependent: ROA, ROS, Sales growth.

8 190 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Goerzen, Beamish, 2003 Research Question(s) What are the latent subcomponents of geographic scope and how are they related to firm success? International asset dispersion and country environment diversity are differentiated. (Relevant) Hypotheses Results Sample Variable Coding H1: The relationship between an MNE's International Asset Dispersion and its Economic Performance is positive. H2: The relationship between an MNE's Country Environment Diversity and its Economic Performance is negative. H3a,b: Interaction of International Asset Dispersion and Country Environment Diversity. H1: Supported. H2: Supported. Global Competitiveness entropy score is dominant, while the Cultural Diversity entropy score has modest impact - a great variance in the levels of economic development has an important negative effect on performance, cultural effects are more modest. H3a,b: The combination of the two geographic scope constructs yields an overall positive effect on firm performance. Explanation for some non-linearity findings: Organizations complexity effect is based on the magnitude of country environment diversity. Greater dispersion of assets is positively related to firm performance. N=580 Japanese MNEs, that have operations in six or more countries. Independent: Entropy measure of international asset dispersion, Environment Diversity: Index consisting of four entropy measures: 1. Global Competitive Index, 2. Culture according to Hofstede (1980), 3. Economic Freedom Index, 4. Political Constraint Index. Dependent: Profitability Index consisting of Jensen alpha, Sharpe ratio, Marketto-book ratio.

9 The Effect of Context 191 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Gomes, Ramaswamy, 1999 Research Question(s) What is the form (linear - nonlinear) of the relationship between internationalization and performance? Is this relationship timestable, because some found positive results that could not be replicated in later studies? (Relevant) Hypotheses Results Sample H: The relationship between multinationality and performance will be nonlinear with performance increasing up to an optimal level beyond which higher levels of multinationality lead to performance decline. Theoretical shortcomings led to "inconclusive" results, because they did not consider that benefits and costs of internationalization change with the degree of internationalization. H: Supported. Adding the squared term significantly increased the proportion of variance explained. N=95 US companies from chemical (28), pharmaceutical (14), IT (24), and electronic equipment (29) industries. Gomez- Mejia, Palich, 1997 What are the performance implications of culturally related vs. unrelated internationalization? Culturally related international diversification will be positively associated with firm performance. Conversely, culturally unrelated global diversification will be negatively associated with firm performance. Cultural diversity is supposed to have a negative impact on production synergies, innovation, technology implementation, organizational transformation processes, market response, interpersonal dynamics, organizational control systems, and human resource programs. Regression tests using nine indicators of cultural diversity revealed no significant cultural effects on any of the indicators. The negative impact of greater cultural diversity can be overcome through deliberate strategies and benefits through cultural heterogeneity. N=442 companies from Fortune 500. Variable Coding Independent: Index of FSTS, FATA, Number of countries. Dependent: ROA, Operating costs to total sales. Independent: Dispersion of subsidiaries across Hofstedes (1980) dimensions. Dependent: ROA, Market-to-book ratio. 10-year averages.

10 192 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Grant, 1987 Research Question(s) The purpose of this paper is to examine more carefully than hitherto the relationship between multinationality and firm performance. (Relevant) Hypotheses Results Sample Reasons for superior performance: 1. Return to intangible assets, 2. Market power conferred by international scope, 3. Capacity to undertake risky investments, 4. Broadening of investment opportunities. Ha: Because of similarities in language and culture, investment in the Commonwealth countries of the Rest of the World and, to a lesser extent, in North America might be expected to be more successful than investment in Western Europe. Hb: Because of differences in levels of economic development and differences in the intensity of competition, UK firms might find it easier to compete in the Rest of the World than in North America, Hc: because of geographical proximity, UK firms might find international integration easier with their European subsidiaries than with those in North America or the Rest of the World. 1. Static analysis: Overseas production ratio has a highly significant positive influence which is consistent across all three profitability measures. 2. Dynamic Analysis: Significant positive coefficient of changes in overseas production to changes in performance variables 3. Geographical influences: Lack of consistent differences between the regression coefficients on the regional overseas production ratios. Result: The primary source of the superior performance of multinationals is competitive advantage rather than the higher rate of profit in the industries of other countries. N=304 quoted, British owned, manufacturing companies taken from the Times 500 list of Britain's largest companies. Variable Coding Independent: Sales of overseas operating subsidiaries as proportion of total sales. Dependent: Sales Growth, ROA, Operating profit growth, ROE, ROS.

11 The Effect of Context 193 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Harveston, Kedia, Francis, 1999 Hitt, Hoskisson, Kim, 1997 Research Question(s) What is the relationship between the extent of foreign dependence and performance? Is this relationship different for firms originating either from the Pacific Rim, Western Europe or North America? How is the relationship between internationalization and performance moderated by productdiversification and innovation (R&D)? In what direction are the causal relationships? (Relevant) Hypotheses Results Sample H1: Dependence on foreign activities of MNC will be positively related to MNC performance. H2a(b): Short-term - ROA, ROS (long-term - market share) orientation measures of performance of European and North American (a Pacific Rim) MNCs will be positively related to the degree of MNC dependence on foreign activities but will have no relationship with the degree of MNC dependence on foreign activities for a Pacific Rim (European and North American) MNC. H1: The relationship between international diversification and firm performance is nonlinear, with the slope positive at low and moderate levels of international diversification but negative at high levels of international diversification. H3: Product diversification positively moderates the curvilinear relationship between international diversification and firm performance. H1: Significant for ROS, not significant for ROA and marketshare. H2: Supported. North America, Europe: significant for ROA, ROS, not significant for market share. Pacific Rim: not significant for ROS, ROA, significant for market share. The performance differences are depending upon the time-horizon of the performance measure. H1: Supported. International diversification is beneficial because internal resource and capabilities can earn rents on market imperfection. On the contrary costs of internal and external communication rise. H3: Supported. Experience with diverse product portfolios helps to handle rising complexity. N=152 firms from the regions Pacific (20), Western Europe (45), and North America (87). Large MNCs from the top 500 global manufacturing and service corporations and 100 largest transnational corporations. N=295 manufacturing firms with sales higher than $100 Mio. Variable Coding Independent: FSTS. Dependent: ROS, ROA, Market-share Independent: Entropy measure of sales dispersion. Dependent: ROA.

12 194 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Hsu, Boggs, 2003 Research Question(s) What is the relationship of internationalization on different performance measures and their decomposition? Theory suggests that these are different constructs therefore differing relationships are expected (linear, u- shaped, inverted u- shaped). (Relevant) Hypotheses Results Sample H1-4: All else being equal, for multinational companies, the relationship between the degree of internationalization and firm performance, measured by H1: ROE, H2: ROA, H3: Profit Margin, H4: Total Asset Turnover will be characterized by an inverted U- shape, with a slope that is positive at lower levels of internationalization and negative at higher levels of internationalization. H1-4: When measured via FSTS a linear curve type explains the relationship for ROA, ROE, Profit Margin best (not an inverted u- shape). Only for Total Asset Turnover a standard u-shaped curve has highest explanatory power. When measured via number of countries an inverted u-shape curve type explains a far higher degree of performance variance for ROA, ROE and Total Asset Turnover. Again, a linear curve type fits best the relationship with Profit Margin. N=118 US firms from Hoover's 750 US Major Public Companies list. Knight, 2000 What are the interrelationships of entrepreneurial orientation, marketing strategy, tactics, and firm performance among SMEs affected by globalization? H6: The more the firm responds to globalization, the better is the performance of the firm. H7: The more the firm prepares in advance to enter foreign markets the better is the performance of the firm. H6: Supported. H7: Supported. SMEs that respond to globalization and prepare in advance to enter foreign markets tend to enjoy better performance. N=216 internationally active firms. Survey method Variable Coding Independent: Number of countries, FSTS. Dependent: ROE, ROA and their decomposition according to the DuPont scheme. Independent: Globalization Index consisting of six items. Dependent: Comparison with competitors based on five items.

13 The Effect of Context 195 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Lu, Beamish, 2001 Research Question(s) What is the relationship between the extent of FDI, exporting activity, and relative use of alliances, to the corporate performance of internationalizing SMEs? (Relevant) Hypotheses Results Sample H1: An SME's performance is positively related to its level of exporting activities. H2: The relationship between the level of FDI and an SME's performance is nonlinear, with the slope negative at low levels of FDI but positive at higher levels of FDI. Resource constraints lead to H3a(b): An SME's performance is positively (negatively) related to its level of alliances with local (home country) partners formed in the process of internationalization. Export and FDI demand different capabilities, therefore: H4: Exporting activities will exert a negative moderating effect on the relationship between FDI and performance. H1: Not supported, negative relationship. H2: Supported. H3a: Supported. H3b: Domestic joint ventures have a negative impact. H4: Supported. Additional comment on liabilities of foreignness: There is a negative impact on performance with a more than two percent reduction in ROA when the number of FDI countries reaches five. N=164 Japanese SMEs listed on the first or second section of the Tokyo stock exchange. Variable Coding Independent: Export intensity (percent of parent sales derived from export revenues), Number of FDI, Percentage of foreign joint ventures. Dependent: ROS, ROA.

14 196 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Lu, Beamish, 2004 Research Question(s) What is the form of the relationship between internationalization and performance? What is the performance impact of intangible assets? (Relevant) Hypotheses Results Sample H1: The relationship between geographic diversification and firm performance is nonlinear, with the slope negative at low levels of geographic diversification, positive at medium levels of geographic diversification and negative at high levels of geographic diversification. H2: A firm s intangible assets moderate the relationship between geographic diversification and firm performance such that high levels of intangible assets increase the performance gains attributable to geographic diversification. H1: Supported. The inclusion of the cubic term significantly improved the model fit. H2: Linear positive effect of R&D on ROA and Tobin's q. N=1489 Japanese firms of which 1059 are engaged in FDI activities. Variable Coding Independent: Index from number of FDI, number of countries. Dependent: ROA, Tobin's q.

15 The Effect of Context 197 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Majocchi, Zucchella, 2003 Research Question(s) Has the process of upgrading the level of international commitment (in order to be rooted in the core world markets, close to key customers) created value for the enterprises involved? Are there country specific factors? Does the form of internationalization (export, FDI) matter? (Relevant) Hypotheses Results Sample H1: A positive relationship exists between SMEs financial performance and its level of export intensity. H2: SMEs exporting in the US are consistently more profitable than SMEs operating in the EU domestic market. H3: The relationship between FDI and profitability is negative. H4: The relationship between FDI and profitability is positive, thus overcoming the liability of foreignness, if FDI follows a high level of export activities by firms. H1: Rejected. H2: Supported. In order to access the American market SMEs must develop high capabilities that finally lead to higher financial performance. H3: Supported. Because of liability of foreignness of SMEs. H4: Supported. Firms that have intensely exported in distant markets generated a value creation process that can be beneficial because of the cumulated knowledge useful and applicable on other internationalization modes. N=220 Italian SMEs in the manufacturing sector. Mauri, Sambharya, 2001 What impact does the amount of integration of the global operations of a firm have on performance? Prior studies focused on the distribution of company activities across countries and overlook at the global exchange of resources among differentiated corporate units. H1: The relation between global integration and firm performance follows an inverse U- shaped curve. H1: Supported, for low levels of integration firm performance tends to increase positively with the level of global integration. The climax is reached at a relatively high level of global integration as it represents 1.3 standard deviations beyond the sample mean. N=91 US companies from four industries with revenues higher than $50 Million. Data source: Compustat Variable Coding Independent: Export sales to total sales, Number of countries, FDI dummy (has FDI / has no FDI). Dependent: ROS, ROA. Independent: Global integration index, shows inter area sales inbetween the company. Dependent: 3 year average ROS.

16 198 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year McDougall, Oviatt, 1996 Qian, 1996 Research Question(s) What is the impact of internationalization on new venture performance? As new ventures internationalize, are changes in their strategies necessary? How are changes in percentage of international sales related to changes in strategies (relative market share) and performance (ROI)? What is the effect of a firm's overseas activities upon its riskreturn performance by using different multinationality measures? (Relevant) Hypotheses Results Sample H1: Technology-based new ventures with higher levels of international sales subsequently have higher levels of performance. H2: Strategic change will be more positively related to performance among technology-based new ventures that have increased their internationalization than among technology-based new ventures that have not increased their internationalization. H1a(b): On average, the profitability of high international market diversifiers - HI (medium international market diversifiers - MI) is greater than that of both MI and low market diversifiers - LI (LI) diversification. H2a(b): On average, the profit stability of HI (MI) is greater than that of both MI and LI (LI). H3: The riskreturn performance of the highest international market diversification group is greater than that of the other MNCs. H1: Supported for relative market share, not supported for ROI. H2: Supported. Ventures with an increase in internationalization have significantly higher correlations between strategic change and both relative market share and ROI. H1a,b: Supported. H2a,b: Supported. H3: Not supported. Any firm which belongs to the multinational category based upon the criterion of multinationality (FSTS) can provide a similar riskreturn performance independent of the number of countries or geographic areas in which it operates. N=62 US manufacturing new ventures that are younger than eight years. N=126 largest US industrial firms. Variable Coding Independent: FSTS. Dependent: ROI, Relative market share. Independent: FSTS. Dependent: ROA, ROE.

17 The Effect of Context 199 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Qian, 2002 Research Question(s) What are the individual and joint effects of multinationality and product diversification on profit performance for a sample of US emerging small- and mediumsized enterprises? (Relevant) Hypotheses Results Sample H2: Performance should positively vary, to a certain extent, with degrees of multinationality. H3: The curvilinear (inverted U- shaped) relationship between multinationality and/or product diversification, and profit performance becomes weaker at high levels of these two dimensions. H2: Supported. Curvilinear relationship. H3: Supported. Firm performance will be positive at low and moderate levels of product diversification and multinationality, but may be adversely affected with further increase in the degree of multinationality and product diversification. N=71 US firms in the manufacturing sector from Hoover s handbook of emerging companies. Qian, Li, 2002 What strategic combination of geographic scale (foreign involvement, multinationality) and scope (different world regions or markets) of foreign operations yields highest performance for large US firms? H1: On the average, profitability of high global market diversification (HGM) is higher than that of both medium global market diversification (MGM) and low global market diversification (LGM). H2: On the average, profitability of the HGM/High foreign involvement (HFI) combination is higher than that of other strategic combinations. H3: Increased geographic scale of foreign operations has positive influence on profit performance. H1: Not supported. HGM strategy did not produce a better return performance as suggested, and even performed poorly relative to the MGM strategy. HFI contributed significantly to a higher profitability (when compared to both MFI and LFI). H2: "may lend support" - no clear statement, afterwards: e.g. HFI/MGM (MFI/MGM) outperforms HFI/HGM (MFI/HGM). H3: Supported. Foreign involvement plays an important role in increasing returns. N=125 US firms out of the largest 500 from Fortune 500. Variable Coding Independent: FSTS. Dependent: ROS, Aftertax profit-tosales. 5-year averages. Independent: Geographic scale: FSTS; Geographic scope: GMD (Global Market Diversification) - Entropy measure. Dependent: ROA, ROS, ROE.

18 200 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Qian, Li, 2003 Research Question(s) What are the profitability determinants of small- and medium-sized enterprises in high-tech industries? Especially: What is the role of innovator position, market awareness, niche operation and internationalization? (Relevant) Hypotheses Results Sample H4: An SMTE's profitability is positively associated with its internationalization. Reasons: 1. R&D investments associated with innovator strategy afford that products are sold across many markets in order to sustain largescale R&D-operations 2. Increase in economies of scale, and experience. H4: Supported. Internationalization generates additional sales; it helps SMTEs split the investments across various markets. It also provides more opportunities for SMTEs to maximize profits before their innovations become obsolete. N=67 Biotech firms. Firms are older than 5 years and have more than 10 employees. Ruigrok, Wagner, 2003 What is the form of the relationship between internationalization and performance? The relationship between "degree of internationalization" and "performance" exhibits a standard-u form, with performance being high at low degrees of internationalization, low at medium degrees of internationalization, and high again at high degrees of internationalization. Supported. Several analysis techniques are applied, all of which have been applied in research of a non-linear relationship to date. These are ANOVA (grouping of observations and analysis of the significance of mean differences), multiple regression and pooled time-series/cross-sectional regression analysis. Regression analysis reveals global minimum at 61% FSTS (dependent variable ROA). N=84 German manufacturing companies from 500 largest manufacturing companies. Variable Coding Independent: FSTS. Dependent: ROA, ROE, ROS, Sales growth. Independent: FSTS. Dependent: ROA, Operating costs to total sales.

19 The Effect of Context 201 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Sambharya, 1995 Research Question(s) What are the individual and joint effects of product and international diversification on firm performance? (Relevant) Hypotheses Results Sample H1: MNCs which are highly diversified internationally will perform better than those which are less diversified internationally. H2: Product diversification will be inversely related to international diversification in MNCs. H3: The interaction between international and product diversification influences performance in MNCs. H1: Not supported. High international diversifiers are not significantly different than those with less international diversification. H2: Supported. MNCs do have a preferred mode of diversification either in terms of markets or products. H3: Strong support. The individual strategies by themselves have no effect on firm performance but their interaction exerts a tremendous influence on firm performance. N=53 US MNCs from the Fortune 500 Industrial list Mailing questionnaire. Siddharthan, Lall, 1982 How may multinationality affect firm growth? Greater multinationality will be positively associated with growth, and the existence of large minimum economies of scale in the relevant industry would strengthen the ability of large MNCs to grow. But: physical distance, linguistic and cultural differences, legal barriers, etc. may increase the costs of assimilating new management over those experiences by a similar-sized purely domestic firm. Multinationality exercises a uniformly negative effect on growth in all the equations. This seems to run counter to what the received wisdom on MNCs would lead us to expect, though it may be in conformity with expectations raised by the managerial literature. N=74 largest US MNCs in manufacturing during Variable Coding Independent: FSTS, FATA, Number of FDI, GMD (Global market diversification index). Dependent: ROS, ROA, ROE. Independent: Foreign affiliate sales to total company sales. Dependent: Growth of consolidated sales revenue, ROE.

20 202 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Simmonds, Lamont, 1996 Tallman, Li, 1996 Research Question(s) What is the impact of product-market diversification and level of foreign involvement on corporate financial performance? What are the theoretical linkages between product-market and geographic diversification and three important performance categories? What is the relationship among international diversity, product diversity, and firm performance? Specifically: How interact different aspects of international diversity (scale - FSTS and scope number of countries) with each other and how are they related to product diversity, and firm performance? (Relevant) Hypotheses Results Sample H1: Product-market and international diversification are independent determinants of firm profitability. H2: Product-market and international diversification are interactive determinants of firm risk adjusted returns. H3: Productmarket and international diversification are interactive determinants of firm growth. H2: Performance should vary positively and linearly with the degree of multinationality. H3: Performance level should vary positively with the geographical scope of international operations. H4: Performance should vary positively with the interaction of multinationality and country scope. H5: The interaction of international and product diversity should reduce the effects of varying levels of product diversity on performance. H1: Cannot be rejected. H2: Cannot be rejected although it appears interactive results were influenced by certain product-market diversification categories. H3: Cannot be rejected. H2: Not supported. H3: Supported. Weak positive effect of country scope, but a quadratic term was not significant. H4: Not supported. H5: Not supported. N=156 US corporations. N=188 large US industrial multinationals from Directory of Multinationals. Variable Coding Independent: FSTS. Dependent: Sales Growth, Earnings per share growth, ROIC, ROA, ROE, Riskadjusted return on invested capital. Independent: FSTS, Number of countries. Dependent: ROS.

21 The Effect of Context 203 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Wan, 1998 Research Question(s) What is the relationship of internationalization and performance in an Asian context, i.e. for Hong Kong MNCs? (Relevant) Hypotheses Results Sample H1: On average, locally incorporated MNCs outperform domestic firms in Hong Kong. H2: For MNCs from Hong Kong, the relationship between international diversification and firm performance is nonlinear and inverted U- shaped. H1: Not supported. H2: Not supported. Internationalization has no impact on profitability but a significant positive impact on stability of profitability and sales growth. N=81 MNCs from Hong Kong, listed on the Stock Exchange of Hong Kong. Wan, Hoskisson, 2003 How is the corporate diversification - performance link related to home country environments? What factors facilitate transformational activities and how foster institutions these transactional activities? Three strategies are differentiated: product, outbound international and inbound international diversification. H2a(b): In more (less) munificent home country environments, outbound international diversification is positively (negatively) related to firm performance. H3a(b): In more (less) munificent home country environments, inbound international diversification is negatively (positively) related to firm performance. H4a(b): In more (less) munificent home country environments, the interaction between product diversification and outbound international diversification is negatively (positively) related to firm performance. H2a: Supported. Firms in more munificent environments are able to show strong performance when they engage in foreign operations. H2b: Not supported. H3a: Partially supported. H3b: Not supported. H4a: Supported. H4b: Supported. Highly munificent countries: N=499 - Sweden (115), France (177), England (207). Less munificent countries: N=233 - Ireland (40), Italy (133), Portugal (50). Variable Coding Independent: International sales concentration according to Palepu (1985). Dependent: ROE, Sales Growth. Independent: Outbound international diversification: Number of countries, Inbound international diversification: Number of foreign partners. Dependent: ROA, Earnings before interest and taxes / assets.

22 204 Appendix Chapter 2 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Zahra, Garvis, 2000 Research Question(s) (1) What is the effect of international corporate entrepreneurship (ICE) effort on company performance? (2) How does perceived hostility of the international environment moderate the relationship between ICE and company performance? (Relevant) Hypotheses Results Sample H1: ICE will be positively associated with a firm's financial performance. H2: The relationship between ICE and a company's performance will be moderated by international environmental hostility. Firms that pursue ICE in international environments with higher levels of hostility will have higher profits and higher growth. H1: Supported. ICE has a significant impact on ROA, revenue growth, foreign profits, and foreign revenue. H2: Supported. Environment hostility has a negative (but not significant) impact on ROA. The interaction term with ICE was significantly and positively associated with ROA - similar results for sales growth. The impact of ICE on ROA and sales growth is greater under higher levels of environment hostility. N=98 US manufacturing companies. Variable Coding Independent: ICE - International corporate entrepreneurship, Global scope: Number of countries. Dependent: ROA, Sales Growth.

23 The Effect of Context 205 A 2.1: Studies of the Meta-Analysis (continued) Author(s) Year Zahra, Ireland, Hitt, 2000 Research Question(s) How do new venture firms that are internationalizing use technological learning gained through internationalization? What is the impact of this learning on the firm's financial performance? What is the impact of the firms' technological learning on their modes of entry into international markets? How does knowledge integration moderate the relationship between international expansion activities and technological learning? (Relevant) Hypotheses Results Sample H4a-c: The (a) breadth, (b) depth, and (c) speed of technological learning in international markets are positively related to new venture performance. H5a,b: International expansion is positively related to new venture profitability (sales growth). H4a,c: Supported. H4b: Partially supported. H5a: Not completely supported. Two of the five measures of international diversity were positively related to ROE. H5b: Supported. Generally: The results show a strong relationship between international diversity and the breadth, depth, and speed of a new venture firm's technological learning, especially when the firm undertakes formal knowledge integration. N=321 US firms from high-tech industries; Age: younger than six year. Variable Coding Independent: Entropy measure of number of countries. Dependent: ROE, Sales growth.

24 206 Appendix Chapter 2 A 2.2: Meta-Analytic Procedure and Statistical Formulas The meta-analysis applied in Chapter 2 can be divided into five main steps: Calculation of the mean effect size and observed variance, division of the observed variance into sampling error variance and residual variance, calculation of credibility interval, subgroup test, and calculation of confidence interval. The formulas used for these statistical analyses are all provided by Hunter and Schmidt (Hunter, Schmidt, and Jackson, 1982; Hunter and Schmidt, 1990). First the sample-size weighted mean effect size r corrected for sampling error is estimated. Following Hunter and Schmidt (1990), the best estimate of the population correlation ( ) is the sample size weighted mean effect size ( r ) (1). The observed variance of correlations across studies (s 2 r ) is defined as the sample size weighted average squared error (2). (1) r N * r i N i i (2) i ri Ni N * 2 r s r 2 where: r i = observed effect size for each sample N i = number of observations per sample. The second step involves a separation of the observed (s 2 r ) into its two different components. It should be noted that the variance of observed effect sizes (s 2 r ) is composed of the true variance (s 2 ) and variance stemming from sampling error (s 2 e ); thus, s 2 r = s 2 + s 2 e. The variance stemming from sampling error is calculated by the following formula (3): (3) s 2 e 1 2 r 2 N * K i where: K = number of samples. 2 Accordingly, s is the residual variance after the variance stemming from sampling error has been removed from the observed variance (i.e. s 2 = s 2 r - s 2 e ).

25 The Effect of Context 207 In the third step, the existence or non-existence of sub-populations i.e., moderators of the internationalization-performance relationship is determined by calculating the credibility interval around the sample size weighted mean effect size corrected for sampling error. The range of the 95 percent credibility interval is based on the corrected standard error (s 2 ) in effect sizes. It is estimated by the following formula (4): (4) r * (s 2 /K) 1/2 < r < r * (s 2 /K) 1/2 I applied two criteria to determine whether my data set is homogeneous (no subgroups exist) or heterogeneous (subgroups or moderators exist). Homogeneity is assumed if credibility intervals do not overlap zero and at least 75 percent of the observed effect size variance is explained by sampling error. If these two criteria are not fulfilled, the fourth step involves subgroup analyses to quantitatively identify individual moderator variables. The z-test used produces critical values that indicate whether effect sizes between subgroups are significantly different. Z-test significance is determined by a one-tailed test if the direction of the effect size is hypothesized and a twotailed test if the direction of the effect size is not hypothesized. The critical value z is calculated by the following formula (5): (5) z r r 1 2 r1 s K r 2 s K 2 where: r (1,2) = mean effect size for compared subgroups weighted by sample size and uncorrected for sampling error 2 s r(1,2) = observed variance of the effect sizes for compared subgroups weighted by sample size and uncorrected for sampling error = number of samples for compared subgroups. K (1,2)

26 208 Appendix Chapter 2 The final step implies the calculation of 95 percent confidence intervals in order to test for the significance of the obtained effect sizes. If an effect size is obtained from a homogeneous population (95 percent credibility intervals did not overlap zero and more than 75 percent of the observed variance was due to sampling error) the confidence interval is calculated around the sample size weighted mean effect size r corrected for sampling error based on the standard error from sampling error variance (s 2 e ) (6). (6) r * (s 2 e /K) 1/2 < r < r * (s 2 e /K) 1/2 But in the case of this meta-analysis all effect sizes are based on heterogeneous populations, since the criteria for population homogeneity were not met in any of the calculations. In such a case the confidence interval is calculated around the sample size weighted mean effect size r corrected for sampling error around the standard error from observed variance (s 2 r ) (7). (7) r * (s 2 r /K) 1/2 < r < r * (s 2 r /K) 1/2

27 The Effect of Context 209 A 2.3: Methodological Moderators Table A Independent Variable: Internationalization Comparison of effect sizes from different single measurement items 95% Variable K N r sr 2 se 2 s 2 confidence interval 95% Credibility interval H1a, H1b: Overall 41 7, : :.270 Foreign sales to total sales Number of foreign countries Entropy measures Indices Number of foreign direct investments Foreign subsidiary sales Foreign assets to total assets Export sales to total sales Others ,755 2,777 2,959 1, a b b.000 b.011 a.080 : : : : : : : : : : : : : : : : : :.312 Notes: K: number of samples, N: sample size Ni, r : sample size weighted mean effect size, sr 2 : variance in effect sizes, se 2 : sampling error variance, s 2 : residual variance (sampling error corrected variance in effect sizes), 95% confidence interval: interval around sample size weighted mean effect size based on observed variance for heterogeneous populations and on sampling error variance for homogenous populations, 95% credibility interval: interval around sample size weighted mean effect size based on residual variance. a Deviation to difference between observed variance and sampling error variance due to rounding. b Zero values are possible in cases where only few studies are included into the estimate of an effect size.

28 210 Appendix Chapter 2 A 2.3: Methodological Moderators (continued) Table A Dependent Variable: Performance Comparison of effect sizes from different single measurement items 95% Variable K N r sr 2 se 2 s 2 confidence interval 95% Credibility interval H1a, H1b: Overall 41 7, : :.270 ROA ROS ROE Other return oriented measures ROI Sales growth Other growth oriented measures Capital market oriented measures Market Share Other ,420 1,973 1,797 1, , , a a b.025 a : : : : : : : : : : : : : : : : : : : :.427 Notes: K: number of samples, N: sample size Ni, r : sample size weighted mean effect size, sr 2 : variance in effect sizes, se 2 : sampling error variance, s 2 : residual variance (sampling error corrected variance in effect sizes), 95% confidence interval: interval around sample size weighted mean effect size based on observed variance for heterogeneous populations and on sampling error variance for homogenous populations, 95% credibility interval: interval around sample size weighted mean effect size based on residual variance. a Deviation to difference between observed variance and sampling error variance due to rounding. b Zero values are possible in cases where only few studies are included into the estimate of an effect size.

29 Intangible Resources as Moderators 211 Appendix Chapter 3 A 3.1 Compilation of Sampling Firms 212 A 3.2 Descriptive Statistics of the Control Variables 224 A 3.3 Comparison of Selected Data from Different Databases 225 A 3.4 Output Screen of Extel Cards for SGL Carbon 226 A 3.5 Coding Procedure of TMT Demographics 234 A 3.6 Coefficients from Hedonic Regression (alternative) 236 A 3.7 Results for Foreign Assets to Total Assets 237 Table A Regression of Curve Type and Moderation of Tobin s q 237 Table A Moderation of Hedonic q 238 Table A Moderation of Individual Intangible Resources 239 A 3.8 Results for Time-Lagged Measurement Designs 240 Table A Moderation of Individual Intangible Resources ROA = t Table A Moderation of Individual Intangible Resources ROA = t

30 212 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed A.S.CREATION TAPETEN O.N. Consumer Home Construction & Furnishings missing 3U TELECOM AG Telecommunication Fixed-Line Telecommunication missing 4 SC AG Pharma & Healthcare Biotechnology missing AAP IMPLANTATE AG Pharma & Healthcare Medical Technology missing AAREAL BANK AG Banks Mortgage Banks ABIT AG O.N. Software Software missing AC-SERVICE AG NA O.N. Software IT-Services missing ADIDAS-SALOMON AG O.N. Consumer Clothing & Footwear missing IFRS ADVA AG OPT.NETW.O.N. Technology Communications Technology US standards (GAAP) ADVANCED PHOTONICS O.N. Industrial Advanced Industrial Equipment missing AHLERS AG ST O.N. Consumer Clothing & Footwear Local standards AIG INTL REAL ESTATE Financial services Real Estate AIXTRON AG O.N. Technology Semiconductors missing US standards (GAAP) ALLIANZ AG VNA O.N. Insurance Insurance ALPHAFORM O.N. Industrial Industrial Products & Services missing ALTANA AG O.N. Pharma & Healthcare Pharmaceuticals IFRS AMADEUS FIRE AG Industrial Industrial Products & Services missing IFRS AMB GENERALI HOLDING AG Insurance Insurance ANALYTIK JENA AG O.N. Industrial Advanced Industrial Equipment missing IFRS ARBOMEDIA AG O.N. Media Advertising missing ARQUES INDUSTRIES AG Industrial Industrial, Diversified IFRS ARTICON INTEGRALIS AG Software Software IFRS ARXES NETW.COMM.CONS.AG Software IT-Services missing ATOSS SOFTWARE AG Software Software missing AUGUSTA TECHNOLOG.AG Industrial Advanced Industrial Equipment US standards (GAAP) AWD HOLDING AG O.N. Financial services Diversified Financial BAADER WP.HDLS.BK.AG O.N. Financial services Securities Brokers BALDA AG O.N. Industrial Industrial Products & Services missing IFRS

31 Intangible Resources as Moderators 213 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed BASF AG O.N. Chemicals Chemicals, Speciality Local standards BASLER AG O.N. Industrial Advanced Industrial Equipment missing BAUVEREIN HAMBURG O.N. Financial services Real Estate missing BAY.HYPO-VEREINSBK.O.N. Banks Credit Banks BAY.MOTOREN WERKE AG ST Automobile Automobile Manufacturers IFRS BAYER AG O.N. Chemicals Chemicals, Speciality missing IFRS BAYWA AG NA. Industrial Industrial Products & Services IFRS BEATE UHSE AG Retail Retail, Catalog Local standards BECHTLE AG O.N. Software IT-Services US standards (GAAP) BEIERSDORF AG O.N. Consumer Personal Products missing IFRS BERTRANDT AG O.N. Automobile Auto Parts & Equipment IFRS BETA SYST.SOFTW.AG O.N. Software Software missing BHW HOLDING AG O.N. Financial services Diversified Financial BILFINGER BERGER AG Construction Construction & Engineering IFRS BIOLITEC AG O.N. Pharma & Healthcare Medical Technology missing US standards (GAAP) BIOTEST AG ST O.N. Pharma & Healthcare Pharmaceuticals IFRS BMP AG Industrial Industrial, Diversified missing missing Local with EEC guidelines BOEWE SYSTEC AG O.N. Industrial Industrial Machinery Local with EEC guidelines BROADNET AG Telecommunication Fixed-Line Telecommunication missing BRUEDER MANNESM.AG O.N. Retail Retail, Specialty missing CAATOOSEE AG Software IT-Services US standards (GAAP) CANCOM IT SYSTEME AG Software IT-Services US standards (GAAP) CARL-ZEISS MEDITEC AG Pharma & Healthcare Medical Technology US standards (GAAP) CASH.LIFE AG Financial services Diversified Financial CCR LOGISTICS SYSTEMS AG Industrial Industrial Products & Services missing CDV SOFTWARE O.N. Media Movies & Entertainment missing CE GLOB.SOURCING AG O.N Industrial Industrial Products & Services missing IFRS CEAG AG Consumer Consumer Electronics missing IFRS

32 214 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed CELESIO AG O.N. Retail Retail, Food & Drug IFRS CENIT AG SYSTEMH.O.N. Software IT-Services IFRS CENTROTEC SUSTAINABLE O.N Industrial Industrial Products & Services missing IFRS CEOTRONICS AG O.N. Technology Communications Technology missing CEWE COLOR HOLDING O.N. Consumer Leisure Goods & Services missing IFRS COLON.REAL ESTATE AG Financial services Real Estate missing COMBOTS AG NA O.N. Software Internet missing US standards (GAAP) COMDIRECT BANK AG Financial services Securities Brokers COMMERZBANK AG O.N. Banks Credit Banks COMPUTERLINKS AG Software IT-Services IFRS COMTRADE AG Software IT-Services missing CONERGY AG O.N. Industrial Renewables IFRS CONSTANTIN FILM AG O.N. Media Movies & Entertainment missing IFRS CONTINENTAL AG O.N. Automobile Auto Parts & Equipment US standards (GAAP) CTS EVENTIM AG Media Movies & Entertainment missing IFRS CURANUM AG Pharma & Healthcare Health Care missing CURASAN AG Pharma & Healthcare Biotechnology missing D + S EUROPE AG Media Advertising missing D. LOGISTICS AG O.N. Transportation & Logistics Logistics US standards (GAAP) DAB BANK AG Financial services Securities Brokers DAIMLERCHRYSLER AG NA O.N Automobile Automobile Manufacturers missing US standards (GAAP) DATA MODUL AG O.N. Technology Electronic Components & Hardware US standards (GAAP) DEAG DT.ENTERTAINM. Media Movies & Entertainment IFRS DEGUSSA AG O.N. Chemicals Chemicals, Speciality IFRS DEUTSCHE BANK AG NA O.N. Banks Credit Banks DEUTSCHE BOERSE NA O.N. Financial services Securities Brokers DEUTSCHE EUROSHOP AG O.N. Financial services Real Estate DEUTSCHE POST AG NA O.N. Transportation & Logistics Logistics IFRS

33 Intangible Resources as Moderators 215 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed DEUTSCHE POSTBANK AG Banks Credit Banks DEUTZ AG O.N. Industrial Heavy Machinery missing Local with EEC guidelines DIS DEUT.IND.SERV.O.N. Industrial Industrial Products & Services missing IFRS DOCCHECK AG Software Internet missing missing IFRS DOUGLAS HOLDING O.N. Retail Retail, Specialty missing Local with EEC guidelines DR. HOENLE AG O.N. Industrial Advanced Industrial Equipment missing DR.SCHELLER COSM.O.N. Consumer Personal Products missing DRAEGERWERK VORZ.A.O.N. Pharma & Healthcare Medical Technology IFRS DRILLISCH AG O.N. Telecommunication Wireless Telecommunication IFRS DT.BETEILIG.AG O.N. Industrial Industrial, Diversified missing missing missing DT.EFF.U.WECH.-BET.G.O.N. Financial services Diversified Financial DT.TELEKOM AG NA Telecommunication Fixed-Line Telecommunication Local with EEC guidelines DUERR AG O.N. Industrial Industrial Machinery IFRS DYCKERHOFF ST O.N. Construction Building Materials missing IFRS E.ON AG O.N. Utilities Multi-Utilites US standards (GAAP) ECKERT+ZIEGLER AG O.N. Pharma & Healthcare Medical Technology missing US standards (GAAP) ELEXIS AG O.N. Industrial Industrial Machinery missing ELMOS SEMICONDUCTOR AG Technology Semiconductors US standards (GAAP) ELRINGKLINGER AG NA O.N. Automobile Auto Parts & Equipment Local with EEC guidelines EM.TV AG Media Movies & Entertainment IFRS EMPRISE MANAG.CON.AG O.N. Software IT-Services missing missing IFRS E-M-S NEW MEDIA AG Media Movies & Entertainment missing EPCOS AG NA O.N. Technology Electronic Components & Hardware US standards (GAAP) EPIGENOMICS AG Pharma & Healthcare Biotechnology missing missing IFRS ERSOL SOLAR ENERGY AG Industrial Renewables missing IFRS ESCADA AG O.N. Consumer Clothing & Footwear IFRS ESSANELLE HAIR GROUP O.N. Retail Retail, Specialty missing EVOTEC AG O.N. Pharma & Healthcare Biotechnology US standards (GAAP)

34 216 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed FIELMANN AG O.N. Retail Retail, Specialty Local with EEC guidelines FJH AG O.N. Software Software IFRS FLUXX AG Retail Retail, Internet missing FORTEC ELEKTRO. O.N. Technology Electronic Components & Hardware missing missing International standards FRAPORT AG FFM.AIRPORT Transportation & Logistics Transportation Services IFRS FREENET.DE O.N. Software Internet missing IFRS FRESEN.MED.CARE KGAA ST Pharma & Healthcare Health Care missing missing missing FRESENIUS AG O.N. ST Pharma & Healthcare Health Care missing US standards (GAAP) FUCHS PETROLUB AG O.N. Chemicals Chemicals, Speciality missing IFRS FUNKWERK O.N. Technology Communications Technology missing GEA GROUP AG Industrial Industrial, Diversified missing missing US standards (GAAP) GERATHERM O.N. Pharma & Healthcare Medical Technology missing GERRY WEBER INTERNAT.O.N. Consumer Clothing & Footwear missing Local with EEC guidelines GESCO AG O.N. Industrial Industrial, Diversified missing GFK AG O.N. Industrial Industrial Products & Services US standards (GAAP) GFT TECHNOLOGIES AG Software IT-Services IFRS GILDEMEISTER AG O.N. Industrial Industrial Machinery IFRS GPC BIOTECH AG Pharma & Healthcare Biotechnology missing US standards (GAAP) GRAMMER AG O.N. Automobile Auto Parts & Equipment missing GRAPHIT KROPFMUEHL AG Basic resources Mining IFRS GRENKELEASING AG O.N. Financial services Diversified Financial H+R WASAG AG Chemicals Chemicals, Speciality missing HANN.RUECKVER.AG NA O.N. Insurance Re-Insurance HAWESKO HOLDING AG SVG Retail Retail, Food & Drug missing HCI CAPITAL NA O.N. Financial services Diversified Financial HEIDELBERG.DRUCKMA.O.N. Industrial Industrial Machinery missing IFRS HEIDELBERGCEMENT AG O.N. Construction Building Materials missing IFRS HEILER SOFTWARE O.N. Software Software missing

35 Intangible Resources as Moderators 217 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed HENKEL KGAA ST O.N. Consumer Personal Products missing IFRS HOCHTIEF AG Construction Construction & Engineering IFRS HOEFT+WESSEL AG O.N. Technology Electronic Components & Hardware missing IFRS HORNBACH HOLD.VZO O.N. Retail Retail, Specialty IFRS HORNBACH-BAUMARKT O.N. Retail Retail, Specialty Local with EEC guidelines HUGO BOSS AG ST O.N. Consumer Clothing & Footwear IFRS HYPO REAL ESTATE HLDG ST Banks Mortgage Banks missing IBS AG EXC.COLL.MANU.O.N. Software Software missing US standards (GAAP) IDS SCHEER AG O.N. Software IT-Services US standards (GAAP) IKB DT.INDUSTRIEBANK O.N. Banks Credit Banks IM INTERNATIONALMED. O.N Media Movies & Entertainment missing IFRS INDUS HOLDING AG Industrial Industrial, Diversified Local with EEC guidelines INFINEON TECH.AG NA O.N. Technology Semiconductors US standards (GAAP) INIT INNOVATION O.N. Technology Electronic Components & Hardware missing INTERHYP AG Financial services Diversified Financial INTERSHOP COMM. Software Internet US standards (GAAP) INTERTAINMENT O.N. Media Movies & Entertainment missing missing IFRS INTICOM SYSTEMS AG Technology Communications Technology missing ISRA VISION O.N. Software Software IFRS ITELLIGENCE AG O.N. Software IT-Services IFRS IVG IMMOBILIEN AG O.N. Financial services Real Estate IVU TRAFFIC TECHN.AG O.N. Software IT-Services IFRS IWKA AG O.N. Industrial Industrial Machinery IFRS JACK WHITE PRODUCT.AG Media Movies & Entertainment missing JENOPTIK AG O.N. Industrial Advanced Industrial Equipment missing IFRS JERINI AG Pharma & Healthcare Biotechnology missing JETTER AG O.N. Industrial Advanced Industrial Equipment missing JUNGHEINRICH AG O.N.VZO Industrial Industrial Machinery US standards (GAAP)

36 218 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed K+S AG O.N. Chemicals Chemicals, Commodity Local standards KARSTADT QUELLE AG O.N. Retail Retail, Multiline IFRS KLOECKNER-WERKE O.N. Industrial Industrial Machinery Local with EEC guidelines KOENIG + BAUER AG ST O.N. Industrial Industrial Machinery IFRS KONTRON AG O.N. Technology Electronic Components & Hardware missing IFRS KRONES AG O.N. Industrial Industrial Machinery missing KWS SAAT AG O.N. Industrial Industrial Products & Services missing Local with EEC guidelines LANXESS AG Chemicals Chemicals, Commodity IFRS LEIFHEIT AG O.N. Consumer Household Appliances & Housewares IFRS LEONI AG NA O.N. Automobile Auto Parts & Equipment US standards (GAAP) LINDE AG O.N. Chemicals Industrial Gases IFRS LINOS O.N. Industrial Advanced Industrial Equipment IFRS LION BIOSCIENCE AG O.N. Pharma & Healthcare Biotechnology US standards (GAAP) LLOYD FONDS AG Financial services Diversified Financial LOEWE AG O.N. Consumer Consumer Electronics missing IFRS LPKF LASER+ELECTRON. Industrial Advanced Industrial Equipment IFRS LUDW.BECK A.RATHAUSECK Retail Retail, Specialty missing LUFTHANSA AG VNA O.N. Transportation & Logistics Airlines missing IFRS MAGIX AG NA O.N. Software Software missing MAN AG ST O.N. Industrial Industrial, Diversified IFRS MARSEILLE-KLINIKEN AG Pharma & Healthcare Health Care Local with EEC guidelines MASTERFLEX O.N. Industrial Industrial Products & Services IFRS MAXDATA AG Industrial Industrial Products & Services IFRS MEDICLIN AG Pharma & Healthcare Health Care Local standards MEDIGENE NA O.N. Pharma & Healthcare Biotechnology US standards (GAAP) MEDION AG O.N. Industrial Industrial Products & Services IFRS MENSCH UND MASCH.O.N. Software Software missing MERCK KGAA O.N. Pharma & Healthcare Pharmaceuticals IFRS

37 Intangible Resources as Moderators 219 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed METRO AG ST O.N. Retail Retail, Multiline IFRS MLP AG Financial services Diversified Financial MOBILCOM AG O.N. Telecommunication Wireless Telecommunication IFRS MORPHOSYS AG O.N. Pharma & Healthcare Biotechnology missing IFRS MPC MUENCH.PET.CAP.O.N. Financial services Diversified Financial MTU AERO ENGINES NA O.N. Industrial Heavy Machinery IFRS MUEHLBAUER HOLD.O.N. Technology Electronic Components & Hardware missing US standards (GAAP) MUELLER-DIE LILA LOGISTIK Transportation & Logistics Logistics missing MUENCH.RUECKVERS.VNA O.N. Insurance Re-Insurance MVV ENERGIE AG O.N. Utilities Multi-Utilites missing missing IFRS MWB WERTPAPIERHAND.AG Financial services Securities Brokers missing NEMETSCHEK AG O.N. Software Software IFRS NET AG Software Software US standards (GAAP) NEUE SENTIM.FILM O.N. Media Advertising missing NEXUS AG O.N. Software IT-Services missing NORDDT.AFFINERIE O.N. Basic resources Steel & Other Metals missing IFRS NORDEX AG O.N. Industrial Renewables missing IFRS NOVEMBER AG O.N. Pharma & Healthcare Biotechnology missing IFRS NUERNBERGER BET.AG VNA Insurance Insurance OHB TECHNOLOGY O.N. Technology Communications Technology missing ONVISTA O.N. Software Internet missing IFRS ORBIS AG O.N. Software IT-Services missing P U.I PER.U.INFO.AG O.N. Software Software missing PAION O.N Pharma & Healthcare Biotechnology missing missing IFRS PANDATEL AG O.N. Technology Communications Technology missing missing US standards (GAAP) PARAGON AG Technology Electronic Components & Hardware missing PARSYTEC AG Software Software US standards (GAAP) PATRIZIA IMMOBILIEN NA ON Financial services Real Estate missing

38 220 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed PC-WARE INFOR.TECHNOLO.AG Software IT-Services IFRS PFEIFFER VACUUM TECH.O.N. Industrial Advanced Industrial Equipment US standards (GAAP) PFLEIDERER AG Industrial Industrial Products & Services missing US standards (GAAP) PLAMBECK N.ENERG.NA O.N. Industrial Renewables missing missing IFRS PLASMASELECT AG Pharma & Healthcare Health Care missing IFRS PLENUM AG O.N. Software IT-Services US standards (GAAP) PONGS + ZAHN AG O.N. Chemicals Chemicals, Commodity missing PRAKTIKER BAU-U.H.HLDG ON Retail Retail, Specialty missing PREMIERE NA O.N. Media Broadcasting IFRS PRIMION TECHNOLOGY O.N. Industrial Industrial Products & Services missing PROCON AG O.N. Media Movies & Entertainment missing PROGRESS-WERK OBERK. O.N. Automobile Auto Parts & Equipment IFRS PROSIEBENSAT.1 O.N.VZO Media Broadcasting IFRS PSI AG F.PR.U.SYS.O.N. Software Software IFRS PULSION ST O.N. Pharma & Healthcare Medical Technology missing PUMA AG Consumer Clothing & Footwear missing IFRS PVA TEPLA AG O.N. Industrial Advanced Industrial Equipment missing Q-CELLS AG Industrial Renewables missing IFRS QSC AG NA O.N. Telecommunication Fixed-Line Telecommunication US standards (GAAP) R. STAHL AG O.N. Industrial Industrial Machinery missing RATIONAL AG Industrial Industrial Products & Services IFRS REALTECH AG O.N. Software IT-Services US standards (GAAP) REPOWER SYSTEMS AG Industrial Renewables missing RHEINMETALL AG Industrial Industrial, Diversified IFRS RHOEN-KLINIKUM O.N. Pharma & Healthcare Health Care IFRS ROHWEDDER AG O.N. Industrial Industrial Machinery missing RUECKER AG O.N. Automobile Auto Parts & Equipment missing US standards (GAAP) RWE AG ST O.N. Utilities Multi-Utilites IFRS

39 Intangible Resources as Moderators 221 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed SALZGITTER AG O.N. Basic resources Steel & Other Metals IFRS SANACORP PHARMAHAN.VZO Retail Retail, Food & Drug IFRS SAP AG O.N. Software Software US standards (GAAP) SARTORIUS AG O.N. Industrial Advanced Industrial Equipment missing IFRS SCHERING AG O.N. Pharma & Healthcare Pharmaceuticals missing IFRS SCHLOTT GRUPPE AG O.N. Media Publishing & Printing International standards SCHWARZ PHARMA AG O.N. Pharma & Healthcare Pharmaceuticals US standards (GAAP) SECUNET SECURITY AG O.N. Software IT-Services missing IFRS SGL CARBON AG O.N. Chemicals Chemicals, Speciality IFRS SHS AG O.N. Software IT-Services missing SIEMENS AG NA Industrial Industrial, Diversified US standards (GAAP) SILICON SENSOR INT. O.N. Technology Semiconductors missing SINGULUS TECHNOL. Industrial Advanced Industrial Equipment missing IFRS SINNERSCHRADER O.N. Software IT-Services missing missing US standards (GAAP) SIXT AG ST O.N. Transportation & Logistics Transportation Services Local with EEC guidelines SOFTING AG O.N. Industrial Advanced Industrial Equipment missing SOFTM SOFTW.U.BER.O.N. Software Software missing SOFTWARE AG O.N. Software Software missing IFRS SOLAR-FABRIK AG O.N. Industrial Renewables missing SOLARWORLD AG O.N. Industrial Renewables IFRS SOLON AG F.SOLARTECH.AG Industrial Renewables missing SPL.MEDIEN AG O.N. Media Movies & Entertainment missing STADA ARZNEIMITT.VNA O.N. Pharma & Healthcare Pharmaceuticals missing IFRS STEAG HAMATECH AG O.N. Industrial Advanced Industrial Equipment missing IFRS STRATEC BIOMED.SY.EO 1 Pharma & Healthcare Medical Technology missing SUEDZUCKER MA./OCHS. O.N. Food & Beverages Food missing IFRS SUESS MICROTEC O.N. Technology Semiconductors missing US standards (GAAP) SUNWAYS AG O.N. Industrial Renewables missing

40 222 Appendix Chapter 3 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed SURTECO AG Basic resources Forest & Paper Products IFRS SYNAXON AG Retail Retail, Specialty missing missing IFRS SYSKOPLAN AG Software IT-Services missing SYZYGY AG O.N. Software IT-Services US standards (GAAP) TA TRIUMPH-ADLER AG Industrial Industrial Products & Services IFRS TAG TEGERNSEE IMMOB. Financial services Real Estate TAKKT AG O.N. Retail Retail, Catalog IFRS TDS INFORMATIONSTECH. Software IT-Services US standards (GAAP) TECHEM O.N. Industrial Industrial Products & Services IFRS TECHNOTRANS AG O.N. Industrial Advanced Industrial Equipment IFRS TELEGATE AG O.N. Telecommunication Telecommunication Services US standards (GAAP) TELES AG INFORM.TECHN. Software Internet IFRS THIELERT NA O.N. Industrial Industrial Machinery missing IFRS THYSSENKRUPP AG O.N. Industrial Industrial, Diversified missing US standards (GAAP) TIPP24 AG NA O.N. Retail Retail, Internet missing IFRS TIPTEL AG Technology Communications Technology IFRS TOMORROW FOCUS AG Software Internet IFRS T-ONLINE INTERN. NA O.N. Software Internet IFRS TRAVEL24.COM AG KON. Retail Retail, Internet missing TRIA IT-SOLUTIONS AG Software IT-Services IFRS TRIPLAN AG O.N. Construction Construction & Engineering missing TUI AG NA Transportation & Logistics Transportation Services IFRS TV-LOONLAND O.N. Media Movies & Entertainment IFRS UMS O.N. Pharma & Healthcare Medical Technology IFRS UNITED LABELS O.N. Retail Retail, Specialty missing IFRS USU SOFTWARE AG Software Software IFRS UTD.INTERNET AG NA Software Internet IFRS UTIMACO SAFEW.AG O.N.SVG Software Software IFRS

41 Intangible Resources as Moderators 223 A 3.1: Compilation of Sampling Firms (continued) Company Name Industry Industry Group Data Availability FSTS (2003) FATA (2003) Accounting Standard followed VARETIS AG Technology Communications Technology missing VCL FILM+MEDIEN AG KONV. Media Movies & Entertainment missing missing missing VILLEROY + BOCH AG VZ Consumer Household Appliances & Housewares IFRS VIVACON AG O.N. Financial services Real Estate missing VOLKSWAGEN AG ST O.N. Automobile Automobile Manufacturers IFRS VOSSLOH AG O.N. Industrial Industrial Products & Services IFRS W.O.M. O.N. Pharma & Healthcare Medical Technology missing WACKER CHEMIE O.N. Chemicals Chemicals, Speciality missing missing WAPME SYSTEMS O.N. Software Internet missing WASHTEC AG O.N. Industrial Industrial Machinery missing WAVELIGHT AG O.N. Pharma & Healthcare Medical Technology missing WCM BET.-U.G. O.N. Industrial Industrial, Diversified Local with EEC guidelines WESTAG + GETALIT ST O.N. Consumer Home Construction & Furnishings Local with EEC guidelines WINCOR NIXDORF O.N. Industrial Industrial Products & Services International standards WIRE CARD AG Software IT-Services missing ZAPF CREATION AG O.N. Consumer Leisure Goods & Services missing US standards (GAAP)

42 224 Appendix Chapter 3 A 3.2: Descriptive Statistics and Correlations Matrix of the Control Variables (N = 789) Variables Mean S. D Total Assets_ln 2. Employees_ln 3. Total Sales_ln 4. Prod. Div._2digitSIC 5. Prod. Div._4digitSIC 6. Total Debt / Total Assets **.97**.53**.58*.34**.94**.52**.58**.39**.53**.58**.38**.77**.31**.51** 7. Long Term Debt / Total Assets **.21**.18**.18**.56**.51** Notes: Bold correlations are those of alternative operationalizations of the control variables. p <.10. * p <.05. ** p <.01 (all two-tailed tests).

43 Intangible Resources as Moderators 225 A 3.3: Comparison of Selected Data from Different Databases Annual Report a Datastream Compustat Extel Cards Turnover Deutsche Post Gildemeister 1.051,5 977, ,5 977,8 Kontron 262,1 229, ,1 229,3 SGL Carbon 944,0 915, ,0 916,0 Vossloh 922,2 912, ,8 912,5 Total Assets Deutsche Post Gildemeister 970,7 874, ,7 874,9 Kontron 278,8 272, ,7 272,1 SGL Carbon 1.314, , , ,9 Vossloh 1.021,3 880, ,3 880,3 Intangible Assets Deutsche Post Gildemeister 98,9 99, ,9 99,8 Kontron 83,5 76, ,5 76,0 SGL Carbon 84,8 99, ,8 99,0 Vossloh 276,0 272, ,0 272,8 R&D expenses Deutsche Post -19,0-19,0 missing missing missing -19,0-19,0 Gildemeister -37,8-43, missing missing -37,8-43,1 Kontron -28,4-26, ,7-26,3 SGL Carbon -19,2-19, ,2-19,0 Vossloh -8,6-7, ,6-7,4 Notes: Bold figures indicate deviations between the data reported in the database as compared to the figures derived from the annual report. Data reported in annual report and Extel cards are in million, data from Datastream and Compustat are in thousand. a

44 226 Appendix Chapter 3 A 3.4: Output Screen of Extel Cards for SGL Carbon Copyright 2006 Thomson Financial Thomson Extel Cards Database May 19, 2006 LAST AMENDED: May 1, 2006 SGL Carbon AG Rheingaustrasse Wiesbaden GERMANY * * * * * * * * * * COMMUNICATIONS * * * * * * * * * * TELEPHONE: FAX: URL: * * * * * * * * * * COMPANY IDENTIFIERS * * * * * * * * * * TICKER: SGL EXTEL REF. NO: SEDOL: ISIN: DE * * * * * * * * * * COMPANY INFORMATION * * * * * * * * * * OPERATING STATUS: Active * * * * * * * * * * CORPORATE STRUCTURE * * * * * * * * * * SUBSIDIARIES Company Country Owned Main Consolidated SGL Carbon AG Germany 100,00% SGL Carbon Beteiligung GmbH Germany 100,00% SGL CARBON GmbH Germany 100,00% SGL TECHNOLOGIES GmbH Germany 100,00% SGL BRAKES GmbH Germany 100,00% SGL Carbon Holding GmbH Germany 100,00% SGL PanTrac GmbH Germany 100,00% SGL Carbon Holding S.L Spain 100,00% KCH Beteiligungs GmbH Germany 100,00% SGL CARBON SA Poland 100,00% ZEW Zaklady Elektrod Weglowych SA Poland 97,20% SGL CARBON spa Italy 99,70% SGL CARBON SA Spain 100,00% SGL CARBON SA France 100,00% SGL CARBON GmbH & Co Australia 100,00% RK Carbon International Ltd United Kingdom 100,00% SGL TECHNIC Ltd United Kingdom 100,00% PG Lawton Ltd United Kingdom 100,00% SGL TECHNIC SA France 100,00% SGL Risomesa SpA Italy 100,00% SGL CARBON Ltd United Kingdom 100,00% SGL CARBON LLC United States 100,00% MGP LLC United States 100,00% HITCO CARBON Composites Inc United States 94,00% SGL TECHNIC Inc United States 100,00% SGL Canada Inc Canada 100,00% SGL ACOTEC Sarl France 100,00% SGL ACOTEC Sarl Maroc Morocco 100,00% SGL ACOTEC Ltd United Kingdom 100,00% SGL ACOTEC SpA Italy 100,00% SGL ACOTEC Polska Spzoo Poland 51,00% Ceilcote Ing Corrosion SA de CV Mexico 51,00% SGL ACOTEC Singapore Pte Ltd Singapore 100,00% SGL ACOTEC Inc United States 100,00% SGL ACOTEC Ltda Brazil 100,00% SGL ACOTEC Wuhan Co Ltd China 90,00% Note: O = Owned; C = Controlled. If neither is indicated then the company has not reported the owned and controlled proportions being different. * * * * * * * * * * EXECUTIVES * * * * * * * * * * SUPERVISORY BOARD Position Name Appointed/Ceased Chairman Max D. Kley Vice Chairman Josef Scherer 27 Apr 2005 Appointed Member Prof. Dr. Utz-Hellmuth Felcht Member Peter Fischer Member Dr. Claus Hendricks Member Juergen Kerner Member Dr. Hubert Lienhard Member Jacques Loppion

45 Intangible Resources as Moderators 227 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) Member Edelbert Schilling Member Andrew H. Simon Member Heinz Will 28 Apr 2005 Appointed Member Hans-Werner Zorn MANAGEMENT BOARD Position Name Appointed/Ceased Chairman & Chief Executive Robert J. Koehler Chief Financial Officer Sten Daugaard Member Theodore H. Breyer Member Dr. Hariolf Kottmann * * * * * * * * * * DESCRIPTION * * * * * * * * * * SGL Carbon AG. The Group's principal activity is to manufacture carbon, graphite and composite materials. The Group operates in three divisions: Carbon and Graphite: develops graphite electrodes designed for industrial steel production in electric arc furnaces; Graphite Specialties: supplies products made of isostatically pressed, extruded, die and vibrationmolded graphite, carbon/carbon, felt, graphite foils and laminated sheets, carbon and graphite yarns for a variety of applications and SGL technologies: develops new business opportunities based on the Group's competencies for high technology materials, processes and applications. The Group has operations in Europe, North, Central and South America. * * * * * * * * * * MARKET AND INDUSTRY * * * * * * * * * * PRIMARY SIC: Carbon and graphite products SECONDARY SIC: Carbon and graphite products Heavy construction, nec Semiconductors and related devices Pumps and pumping equipment Minerals, ground or treated Process control instruments PRODUCTS: Carbon & graphite accounted for 60% of 2005 revs; Special graphite, 25%; Technical products, 15% & Others nominal. MARKETS: GERMANY - * * * * * * * * * * FINANCIALS * * * * * * * * * * FISCAL YEAR DATE: 12/31 * * * * * * * * * * BALANCE SHEET * * * * * * * * * * CONSOLIDATED BALANCE SHEETS Eurom Eurom Eurom Eurom Eurom FIXED ASSETS Intangible assets 86,6 84, ,8 111,2 Tangible assets ,1 408,5 477,3 553,5 Financial assets 14,9 11,5 28,7 33, ,5 449,4 536,2 614,3 698,7 MISC ASSETS 132,8 195,4 127,2 93,4 80,4 CURRENT ASSETS Stocks 280,6 256, ,4 394,2 Rcble-eqty A/c cos ,9 6,4 Intra-group recbles 3,7 6,9 28,7 - - Trade debtors 192,3 178,2 204,2 198,1 256 Prepays/accrued inc 4,1 3,5 3,3 7 - Tax recoverable 9,9 9,8 17,5 19,8 - Misc debtors 14,7 10,7 25,7 - - Cash & near cash 93, Cash & equivalents - 67,5 46,1 21,4 11,6 Trading investments 4,3 9,9-0,1 0,5 Misc current assets , ,9 583,5 578,7 715,9 CREDS due within 1 yr Short term debt 5,8 66,3 83,9 193,1 300,7 Pble-group cos - - 5,5 6 3,8 Trade creditors 89,2 90,3 98,9 110,5 107,7 Accruals & defd inc 7,9 6,5 7,6 - - Payments on account - - 1,8 0,8 7,3 Revenue tax 16,1 10,3 9,5 6,4 12,5 Tax & social security 5,9 4,8 8,2 6,7 5,2 Current provisions ,6 - - Misc creditors 40,4 59,8 105,9 131,3 168,4 316, ,9 454,8 605,6

46 228 Appendix Chapter 3 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) NET CURRENT 286,7 301,9 108,6 123,9 110,3 ASSETS TOTAL , ,6 889,4 ASSETS LESS CURRENT LIABILITIES CREDS due after 1 yr Long term debt 336,3 353,3 410,6 255,4 238,2 L/T trade creditors 0, Misc other L/T liabs 0,2 36, , ,6 255,4 238,2 PROVISIONS 206,7 221,4 244,5 378,5 394,4 MISC - 65, LIABILITIES NET ASSETS 323,4 269,1 116,9 197,7 256,8 SHARE 144,9 142,9 56, ,2 CAPITAL Share premium 280, ,5 111,3 111,3 Retained earnings -111,6-25,2-51,7 37,8 88,7 Profit for the year 28,2-86, Currency apprecn res -19,1-39,6 - -8,8 - Misc reserves -0,9 1, SHAREHOLDER 322,1 267,3 116,6 196,3 255,2 S' FUNDS Minority interests 1,3 1,8 0,3 1,4 1,6 NET ASSETS 323,4 269,1 116,9 197,7 256,8 NOTES TO CONSOLIDATED BALANCE SHEETS Eurom Eurom Eurom Eurom Eurom INTANGIBLE ASSETS Goodwill, gross 66,8 61,6 114,6 120,8 132,3 Goodwill, amortn ,5-29,9-26,6 Goodwill, net 66,8 61,6 78,1 90,9 105,7 Brands/patents, gross Brands/patents amortn ,5 Brands, patents, net ,5 Misc intang FA, gross 42, ,3 34,4 - Misc intang FA amortn -22,7-17,8-23,4-21,5 - Misc intang FA, net 19,8 23,2 20,9 12,9-86,6 84, ,8 111,2 Property - cost 321,7 312,9 355, ,8 Property depreciation ,1-204,4-203,7-214,5 Property NBV 122,7 124,8 151,1 168,3 181,3 Property NBV 122,7 124,8 151,1 168,3 181,3 Oth tangible FA-cost 1.111, , , , ,10 Oth tangible FA depn -907,3-853,8-851,6-875,7-929,6 Other tangible FA NBV ,5 240,1 279,6 319,5 Cap w-i-p gross c/f 19, ,5 29,6 52,9 Cap w-i-p written off -0,2-0,2-0,2-0,2-0,2 Cap w-i-p NBV c/f 19,3 18,8 17,3 29,4 52,7

47 Intangible Resources as Moderators 229 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) Tangible assets ,1 408,5 477,3 553,5 FINANCIAL ASSETS Investments 2,4 2,4 2,5 2,5 2,7 Invs in assoc cos 7,7 4, ,6 - Trade investments ,1 Trade investments 7,7 4, ,6 26,1 Long term receivables ,2 Misc financial assets 4,8 4,7 5,2 5,1-14,9 11,5 28,7 33,2 34 STOCKS Raw materials etc 85,2 64,4 71,8 83,1 109,1 Work in progress 138,5 134,9 138,5 147,9 200,9 Finished gds & resale 56,9 57,1 47,1 54,5 71 Advance stock pmts - - 0,6-6,4 0,6 Misc stocks ,3 12,6 280,6 256, ,4 394,2 DEBTORS includes L/T trade debtors 0,1 0,3 2,2 0,3 0,4 Misc L/T debtors - - 0,2 - - Due after one 0,1 0,3 2,4 0,3 0,4 year DEBT BY TYPE Convertible loans , Credit institutions 88,1 119,9 360,8 313,5 359,5 Bills & notes Misc debt , ,4 342,1 419,6 494,5 448,5 538,9 DEBT BY MATURITY Debt due within 1 yr 5,8 66,3 83,9 193,1 300,7 Short term debt 5,8 66,3 83,9 193,1 300,7 PROVISIONS Tax provisions 0,9-1,3 2,3 10,5 Deferred taxation 34,7 45, ,7 36,7 Pension provisions 134,2 133, ,5 216,1 Severance provisions 13,8 13,2 15,3 75,8 71,1 Misc provisions 23,1 29,4 23,9 43, ,7 221,4 244,5 378,5 394,4 SHARE CAPITAL Ordinary shares 144,9 142,9 56, ,2 SHAREHOLDERS' FUNDS Eqty s/holders funds ,3 255,2 COMMITMENTS AND CONTINGENCIES Lease commitments 8,1 7,7-11,1 9,4 PENSION BENEFITS Pension benefit 268,9 216, ,8 - oblig. Fair value - plan 63,9 47,4 40,9 45,3 - assets Unfunded pension ,4 193,1 199,5 - liab PENSION BENEFIT COSTS Pension service costs -5,1-5,2-4,7-5,5 - Pension interest cost -12,8-11,8-13,6-14,2 - Exp return - plan 4,9 3,4 3,2 4,5 - assets Oth net pension -6,7-6,6 - -3,5 -

48 230 Appendix Chapter 3 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) * * * * * * * * * * INCOME STATEMENT * * * * * * * * * * CONSOLIDATED PROFIT AND LOSS ACCOUNT Eurom Eurom Eurom Eurom Eurom TURNOVER 1.068, , , , ,30 Cost of sales -746, ,6-886,5-941,8 GROSS 322,1 287,7 251,6 225,8 291,5 PROFIT Distribution costs -126,8-119,1-121,8-139,4-154,5 Administration exps -48,1-86,2-65,9-47,5-57,8 Provisions 0,1 1,8 2,8 - - Other trading exps -26,2-23,7-27,2-25,4-31,1 Other trading inc net 2,8-1,9 15,1 10,6 Exceptional chgs-tdg -11,1-19,1-27,4-30,3-76 TRADING 112,8 41,4 14-1,7-17,3 PROFIT Equity A/c profits 0,8-0, Interest/inv income 5,5 4,9 3,3 12,3 5,7 Interest payable -43,8-38,9-42,8-37,8-54,2 Net interest expense - -4,6-3,3 - - Other expenses net -28,1-27,1-35,5 - - PROFIT 47,2-25,1-64,3-27,2-65,8 BEFORE TAX Tax -19,1-0,4 14,1 3,6-29,2 PROFIT 28,1-25,5-50,2-23,6-95 AFTER TAX Minority interests 0,1-0,1-0,1 - -0,2 Discont ops inc net ,5 - - Net credits 0,1-0,1-21,6 - -0,2 Extraordinary losses - -60, NET INCOME 28,2-86,4-50,3-23,6-95,2 Ordinary dividends RETAINED PROFITS 28,2-86,4-50,3-23,6-95,2 NOTES TO CONSOLIDATED PROFIT AND LOSS ACCOUNT Eurom Eurom Eurom Eurom Eurom PROVISIONS Provns written back 3 3,1 4,2 - - Misc provisions -2,9-1,3-1, ,1 1,8 2,8 - - OTHER TRADING EXPS Net exchange losses -2-1,2-2,8 - - Research & dev , ,4-31,1 Misc other tdg exps -6,2-3,3-5, ,2-23,7-27,2-25,4-31,1 OTHER TRADING INC NET Misc other tdg inc 2,8-1,9 15,1 10,6 EXCPL CHARGES-TDG FA disposal gain-tdg 9,7 0,6 2,5 - - Reorg costs-tdg -20,8-19,7-10,4-8,3-41 Misc excpl chgs-tdg , ,1-19,1-27,4-30,3-76 INTEREST/INV INCOME Investment income ,8 3,2 Interest income 5,5 4,9 3,3 14,1 2,5 5,5 4,9 3,3 12,3 5,7

49 Intangible Resources as Moderators 231 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) OTHER EXPENSES NET Misc expenses net -28,1-27,1-35,5 - - TAX BY COUNTRY Domestic current tax 0,7-0,2-0,3-2,1-5,6 Domestic deferred tax 0,1-0,7 27,2 11,1-1,6 Domestic tax 0,8-0,9 26,9 9-7,2 Overseas tax -19,9-0,3-8,1-5,4-22 Misc tax by country - 1,2-4, ,1-0,4 14,1 3,6-29,2 TAX BY TYPE Current taxation -26,3-16,7-14,3-7,8-22,4 Deferred taxation 7,2 15,5 33,1 11,4-6,8 Misc tax by type - 1,2-4, ,1-0,4 14,1 3,6-29,2 EXTRAORDINARY LOSSES Xord discont bus cost - -60, Av no of staff No of staff at y/e Depreciation -60,7-62,3-64,5-71,3-78,9 Goodwill amortisation ,9-5,1-4,4 Brands amortisation ,5 Licences amortisation -4,4-4,6-3,8-4,8 - Duties & taxes -7,6-7,6 - -9,8-9,7 Net exchange losses ,2-5,6 FA disposal gain-tdg ,6-2,2 CONSOLIDATED PROFIT AND LOSS ACCOUNT - DISCONTINUED - EXISTING Eurom Eurom Eurom Eurom Eurom TURNOVER ,7 130,4 - - Cost of sales - -97,7-113,8 - - GROSS PROFIT ,6 - - Distribution costs - -42,6-29,1 - - TRADING PROFIT - -17,6-13,5 - - a) Restated to confirm with current presentation or current accounting policies PROFIT BEFORE TAX IS AFTER (CHARGING) CREDITING STAFF EXPENSES BY GRADE Wages & salaries ,9-207,7-298,1-326 Social security -53,8-59,4-51,5-51,4-59,9 Staff pensions -19,7-20,2-20,5-18,7-17,3-309,5-289,5-279,7-368,2-403,2 Staff expenses by type Directors emoluments ,9 - FEES ETC Auditors remuneration -1, Non-audit fees -0, CALENDAR: DATE EVENT 09-Mar-2006 Prelim 25. Apr 06 First Quarter 28. Apr 06 Annual General Meeting 26. Jul 06 Second Quarter 26-Oct-2006 Third Quarter LOAD-DATE: May 22, 2006 Your use of this service is governed by Terms and Conditions. Please review them. Copyright 2006 LexisNexis Group a division of Reed Elsevier (UK) Ltd. All rights reserved.

50 232 Appendix Chapter 3 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) * * * * * * * * * * CASHFLOW STATEMENT * * * * * * * * * * CONSOLIDATED STATEMENT OF CASH FLOWS Eurom Eurom Eurom Eurom Eurom OPERATIONS 17,5 45,4 16, , INVESTING ACTIVITIES Invests acquired -2,3-0,8-1,7 - - Property acquired -6, Equip & vehs acquired -33, Tangibles acquired - -46,3-43,4-41,5-96,1 Intangibles acquired -5, ,1 - Trade invs sold ,5 Investments sold 0,3 2 5,7 - - FA sold 16,1 4,5 1,5 7,8 3,8 Misc investing inflow ,9-5, ,6-40,6-37,9-40,9-92, FINANCING Debt raised - 38,6 60,5-36,5 Share capital issued 2,5 244,1 1 0,8 2,2 Debt repaid -92,7-89, ,6 - Dividends paid ord ,2-0,1 Misc financing inflow -0,8-23,9-15, ,5 45, , OTHER - -24,6 0,7 - - INFLOWS CASH& -104,1 149,7 24,9 11,1 8,5 EQVTS INCREASE Currency appreciation 2-0,3-0,3-1,7-6, B/S CASH& -102,1 149,4 24,6 9,4 2,3 EQVT INCR NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS Eurom Eurom Eurom Eurom Eurom OPERATIONS Profit before tax 47,2-2,9-47,5 - - Taxation -22,6-14,2-4,2 - - Net income ,2-65,8 Depn & amortn incr 65,1 67,6 69,5 81,4 86,8 Provision increases 13 16,3 24,2-2,8 19,8 Other tdg adj incr -64,9-48,2 1-32,4-3,8 Asset disposal -9,7-0,6-3,4-3,8 1 Decrease in stocks -10,1-4 0,3 82,7-21,5 Decrease in debtors -8,2 0,9-31,2 44,7 65,8 Increase in creditors -4,8 3,5-4,1 6,8 17 Other wkg cap decr 12, ,9-10,4-36, ,5 45,4 16, , BUSINESS ANALYSIS: BUSINESS ANALYSIS - TURNOVER Eurom Eurom Eurom Eurom Eurom Carbon & graphite Special graphite Technical products Other Corrosion protection Intra-group (63.5) (51.2) (465.2) (506.1) (468.5) TURNOVER 1, , , , , , ,

51 Intangible Resources as Moderators 233 A 3.4: Output Screen of Extel Cards for SGL Carbon (continued) BUSINESS ANALYSIS - PROFIT BEFORE TAX Eurom Eurom Eurom Eurom Eurom Carbon & graphite 121,6 86,4 65,5 51,9 78,9 Special graphite 19,8 13,9 12,4 1,9 26 Technical products 0,2-10,6-13,6-11,7-24,8 Other -28,8-30,7-36,8-18,3-21,4 Corrosion protection ,8 - Intra-Group Discontinued ops - -22,2-91,8 - - Exceptional charges ,3-76 Assoc cos profit 0,8-0, Net interest expense -52,2-50, ,5-48,5 Misc -14,2-10, PROFIT 47,2-25,1-64,3-27,2-65,8 BEFORE TAX ,2-25,1-64,3-27,2-65, BUSINESS ANALYSIS - TOTAL ASSETS Eurom Eurom Eurom Eurom Eurom Carbon & graphite 513,8 520,1 531,3 - - Special graphite ,9 224,8 - - Technical products 220,3 201,1 203,2 - - Total 961,1 926,1 959,3 - - a) Restated to confirm with current presentation or current accounting policies GEOGRAPHICAL ANALYSIS - TURNOVER BY SOURCE Eurom Eurom Eurom Eurom Eurom Rest of Europe - 390,1 632,4 692,4 676,8 Germany 358,1 313,9 469,6 588,9 636,1 Rest of Europe 440, North America 264,6 229, ,6 372,2 South America ,1 8 Asia 5,4 10,9-7,4 8,7 Intra-group ,1-468,5 Adjustment accounts , , , , , GEOGRAPHICAL ANALYSIS - TURNOVER BY MARKET Eurom Eurom Eurom Eurom Eurom Western Europe - 320,2 306,9 - - Germany 142, ,6 216,6 246 Rest of Europe 380, ,8 409,2 North America 283, ,7 281,6 315,8 South America ,4 63,4 63,1 Asia 261,9 233,8 171,2 176,9 199, , , , , GEOGRAPHICAL ANALYSIS - TOTAL ASSETS Eurom Eurom Eurom Eurom Eurom Rest of Europe - 365, Germany 330,6 296, Rest of Europe 328, North America 275,8 237, Asia 26,1 27, Total 961,1 926,

52 234 Appendix Chapter 3 A 3.5: Coding Procedure of TMT Demographics The following section exemplifies the procedure to obtain top management team demographic information from internet resources (specifically company web sites) for SGL Carbon. In the first step the names of the members of the top management team are obtained from Extel Cards. * * * * * * * * * * EXECUTIVES * * * * * * * * * * SUPERVISORY BOARD Position Name Appointed/Ceased Chairman Max D. Kley Vice Chairman Josef Scherer 27 Apr 2005 Appointed Member Prof. Dr. Utz-Hellmuth Felcht Member Peter Fischer Member Dr. Claus Hendricks Member Juergen Kerner Member Dr. Hubert Lienhard Member Jacques Loppion Member Edelbert Schilling Member Andrew H. Simon Member Heinz Will 28 Apr 2005 Appointed Member Hans-Werner Zorn MANAGEMENT BOARD Position Name Appointed/Ceased Chairman & Chief Executive Robert J. Koehler Chief Financial Officer Sten Daugaard Member Theodore H. Breyer Member Dr. Hariolf Kottmann Source: Extel Cards In the second step these names are cross-checked with information obtained from the company web site and annual reports. In the third step the same company web resources are searched for information on the national and educational background of members of the top management team. Based on this information the two variables top management team international diversity (TMT_INT) and top management team education (TMT_ACD) are calculated in a final step. For SGL Carbon the result would be as follows: TMT_INT: Two out of four members are internal. TMT_ACD: One out of four members holding an academic title.

53 Intangible Resources as Moderators 235 The following screenshots are taken from the company web site of SGL Carbon and depict the members of the management board. ( date: )