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• Working Paper | HBS Working Paper Series | 2018

  Corruption, Government Subsidies, and Innovation: Evidence from China

  Lily Fang, Josh Lerner, Chaopeng Wu and Qi Zhang

  Governments are important financiers of private sector innovation. While these public funds can ease capital constraints and information asymmetries, they can also introduce political distortions. We empirically explore these issues for China, where a quarter of firms’ R&D expenditures come from government subsidies. Using a difference-in-differences approach, we find that the anti-corruption campaign that began in 2012 and the departures of local government officials responsible for innovation programs strengthened the relationship between firms’ historical innovative efficiency and subsequent subsidy awards and depressed the influence of their corruption-related expenditures. We also examine the impact of these changes: subsidies became significantly positively associated with future innovation after the anti-corruption campaign and the departure of government innovation officials.

  Keywords: Crime and Corruption; Business and Government Relations; Innovation and Invention; China;

  Citation:

  Fang, Lily, Josh Lerner, Chaopeng Wu, and Qi Zhang. "Corruption, Government Subsidies, and Innovation: Evidence from China." Harvard Business School Working Paper, No. 19-031, September 2018.  View Details

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• Case | HBS Case Collection | September 2018

  Clayton, Dubilier & Rice at 40

  Josh Lerner, Abhijit Tagade and Terrence Shu

  In 2018, private equity firm Clayton, Dubilier & Rice celebrated its 40th anniversary and its 20th year under the leadership of CEO Don Gogel. In those decades, CD&R showed solid portfolio performance and generated strong returns for its investors - accomplishments attributed to its unique balance between operations and finance professionals. The firm made sure that, for every deal, it had both the finance and operations expertise to grow revenues, streamline operations, and truly turnaround distressed companies. But as CD&R entered into its fifth decade and its largest fund to date (nearly $10 billion AUM), competition, AUMs, industry "dry powder," and buyout valuations were all on the rise. Within CD&R, rapidly-evolving technologies, talent retention, and the prospect of Gogel's retirement presented additional sources of pressure. Gogel and his team had to consider whether CD&R could maintain its unique identity and continue to add value as it had in the past in the face of such circumstances.

  Keywords: finance; private equity; succession; buyout; Leveraged Buyout; turnaround; operations; Private Equity; Management Succession; Business Model; Leveraged Buyouts; Trends; Organizational Change and Adaptation;

  Citation:

  Lerner, Josh, Abhijit Tagade, and Terrence Shu. "Clayton, Dubilier & Rice at 40." Harvard Business School Case 819-055, September 2018.  View Details

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• Teaching Note | HBS Case Collection | September 2018

  Blackstone at Age 30

  Josh Lerner

  This teaching note is meant to guide in the instruction of HBS No. 316-013 "Blackstone at 30" case. It examines the process of institutionalization and scaling in private equity and alternative investments more generally, looking specifically at how Blackstone's size affects its business model and opportunities for growth. It also explores the process by which Blackstone became a publicly owned company as well as the advantages and disadvantages that public ownership offers to a firm like Blackstone.

  Keywords: finance; private equity; Blackstone; alternative assets; venture capital; Private Equity; Business Growth and Maturation; Public Ownership; Cost vs Benefits; Financial Services Industry;

  Citation:

  Lerner, Josh. "Blackstone at Age 30." Harvard Business School Teaching Note 819-053, September 2018.  View Details

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