Private Equity and Workers' Career Paths: The Role of Technological Change
Ashwini K. Agrawal
New York University (NYU) - Department of Finance
New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Information, Operations, and Management Sciences
October 29, 2014
We examine the long-run career paths of a large sample of individuals employed by firms acquired in leveraged buyouts. In contrast to commonly held views, the average employee from an LBO-acquired firm is subsequently employed for a longer amount of time over her career than similar individuals from non-acquired firms. We argue that the leading explanation for these findings is that private equity has facilitated technological upgrades, which in turn impart many employees with new skills that complement modern production methods. The effects that we document are especially strong for workers who perform tasks that have been transformed by information technologies (IT), and we find that these workers are more likely to transition to firms that have demand for IT-related skills. The findings underscore the role of private equity in diffusing new technologies during the most recent LBO wave and slowing or reversing the depreciation of skills for workers at firms that otherwise underinvest in modern production methods.
Number of Pages in PDF File: 51
Keywords: private equity, labor outcomes, IT investment, human capital, unemployment, technology
Date posted: June 29, 2013 ; Last revised: November 4, 2014
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