SIFR Research Report Series, Institute for Financial Research
Private Equity and Long-Run Investment: The Case of Innovation
(), Per Strömberg
() and Morten Sörensen
Abstract: A long-standing controversy is whether LBOs relieve
managers from short-term pressures from public shareholders, or whether LBO
funds themselves are driven by short-term profit motives and sacrifice
long-term growth to boost short-term performance. We investigate 495
transactions with a focus on one form of long-term activities, namely
investments in innovation as measured by patenting activity. We find no
evidence that LBOs are associated with a decrease in these activities.
Relying on standard measures of patent quality, we find that patents
granted to firms involved in private equity trans actions are more cited (a
proxy for economic importance), show no significant shifts in the
fundamental nature of the research, and are more concentrated in the most
important and prominent areas of companies' innovative portfolios.
Keywords: Private equity; patents; innovation; short-termism; (follow links to similar papers)
JEL-Codes: G24; G32; O31; (follow links to similar papers)
49 pages, February 15, 2009
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