Private Equity and Long-Run Investment: The Case of Innovation / Josh Lerner, Morten Sørensen, Per Strömberg.

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Lerner, Josh

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w14623.Publication details: Cambridge, Mass. National Bureau of Economic Research 2008.Description: 1 online resource: illustrations (black and white)Subject(s):

G24 - Investment Banking • Venture Capital • Brokerage • Ratings and Ratings Agencies
G32 - Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
O31 - Innovation and Invention: Processes and Incentives

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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 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.

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Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w14623 (Browse shelf(Opens below))	Not For Loan

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December 2008.

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 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.