Going Private and Innovation

48 Pages Posted: 13 Nov 2019 Last revised: 17 Nov 2019

See all articles by Tolga Demir

Tolga Demir

Sabanci University; Stockholm School of Economics; Swedish House of Finance

Ali Mohammadi

Copenhagen Business School - Department of Strategy and Innovation; Danish Finance Institute; Royal Institute of Technology (KTH) - Center of Excellence for Science and Innovation Studies

Date Written: September 30, 2019

Abstract

In this paper, we investigate how going private affects corporate innovation activities. We compare the innovation activities of firms that went private to the innovation activities of firms that received a going-private offer but stayed as public for reasons unrelated to innovation. Using patent-based metrics, we find that the scale of innovation grows after going private. The most important innovations after going private have higher quality relative to the most important innovations before going private. Firms that go private also produce more influential patents in the following years after going private. In line with the predictions of agency theories, our results suggest that going private has a significant positive impact on the innovation performance of listed firms. We also find that, in public-to-private transactions, being acquired by a private equity (PE) firm does not bring an additional performance boost in terms of innovation in comparison to being acquired by a non-PE firm.

Keywords: Innovation, going private, patent, ownership structure, public vs private, LBO

JEL Classification: G30, G34, O16, O30

Suggested Citation

Demir, Tolga and Mohammadi, Ali, Going Private and Innovation (September 30, 2019). Swedish House of Finance Research Paper No. 19-13. Available at SSRN: https://ssrn.com/abstract=3479980 or http://dx.doi.org/10.2139/ssrn.3479980

Tolga Demir

Sabanci University ( email )

Sabancı Business School
Istanbul, 34956
Turkey
+902164839661 (Phone)

HOME PAGE: http://sites.google.com/view/tolga-demir

Stockholm School of Economics ( email )

111 60 Stockholm
Sweden

Swedish House of Finance ( email )

SE-113 83 Stockholm
Sweden

Ali Mohammadi (Contact Author)

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

Danish Finance Institute ( email )

Royal Institute of Technology (KTH) - Center of Excellence for Science and Innovation Studies ( email )

Drottning Kristinas väg 30
Stockholm, SE-100 44
Sweden

Register to save articles to
your library

Register

Paper statistics

Downloads
35
Abstract Views
296
PlumX Metrics