Private Equity and Long-Run Investment: The Case of Innovation

This paper discusses 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. This paper investigates 495 transactions with a focus on investments in innovation as measured by patenting activity…

This paper relies on standard measures of patent quality. We find that patents granted to firms involved in private equity transactions 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….

Author: Josh Lerner, Morten Sørensen, Per Strömberg

Source: National Bureau of Economic Research