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

50 Pages Posted: 15 Jan 2009 Last revised: 13 Jan 2015

See all articles by Josh Lerner

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Morten Sorensen

Dartmouth College - Tuck School of Business; Centre for Economic Policy Research (CEPR)

Per Strömberg

Swedish House of Finance; ECGI; CEPR

Multiple version iconThere are 3 versions of this paper

Date Written: December 2008

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.

Suggested Citation

Lerner, Josh and Sørensen, Morten and Stromberg, Per, Private Equity and Long-Run Investment: The Case of Innovation (December 2008). NBER Working Paper No. w14623, Available at SSRN: https://ssrn.com/abstract=1327245

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6065 (Phone)
617-496-7357 (Fax)

HOME PAGE: http://www.people.hbs.edu/jlerner/

Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

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Morten Sørensen

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Per Stromberg

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://www.hhs.se/en/houseoffinance/about/people/people-container/per-stromberg/

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