The Impact of Private Equity on Firms’ Patenting Activity

Posted: 10 May 2017

See all articles by Kevin Amess

Kevin Amess

Nottingham University Business School

Joel Stiebale

University of Nottingham; Nottingham University Business School; University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP); Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Mike Wright

Imperial College London

Date Written: September 14, 2015

Abstract

The paper analyses the impact of private equity (PE) backed leveraged buyouts (LBOs) on innovative output (patenting). Using a sample of 407 UK deals we find that LBOs have a positive causal effect on patent stock and quality-adjusted patent stock. Our results imply a 6% increase in quality-adjusted patent stock three years after the deal. The increase in innovative activity is concentrated among private-to-private transactions with a 14% increase in the quality-adjusted patent stock. We also find evidence suggesting that PE firms facilitate the relaxation of financial constraints. In sum, our findings suggest that PE firms do not promote short-term cost-cutting at the expense of entrepreneurial investment opportunities with a long-term pay-off.

Keywords: private equity, leveraged buyout, entrepreneurial buyouts, innovation

JEL Classification: D22, G32, G34, L26

Suggested Citation

Amess, Kevin and Stiebale, Joel and Wright, Mike, The Impact of Private Equity on Firms’ Patenting Activity (September 14, 2015). European Economic Review, Vol. 86, 2016. Available at SSRN: https://ssrn.com/abstract=2966209

Kevin Amess (Contact Author)

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

HOME PAGE: http://www.nottingham.ac.uk/business/lizka1.html

Joel Stiebale

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

University of Nottingham - Leverhulme Centre for Research on Globalisation and Economic Policy (GEP) ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany
+492018149261 (Phone)

HOME PAGE: http://www.rwi-essen.de\stiebale

Mike Wright

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

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