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Publications
Publications
  • April 2011
  • Article
  • Journal of Finance

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

By: Josh Lerner, Morten Sorensen and Per Stromberg
  • Format:Print
  • | Pages:33
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Abstract

A long-standing controversy is whether LBOs relieve managers from short-term pressures of dispersed 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 decrease these activities. Relying on standard measures of patent quality, we find that patents applied for by firms 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.

Keywords

Patents; Private Equity; Leveraged Buyouts; Investment; Innovation and Invention

Citation

Lerner, Josh, Morten Sorensen, and Per Stromberg. "Private Equity and Long-Run Investment: The Case of Innovation." Journal of Finance 66, no. 2 (April 2011): 445–477.
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About The Author

Josh Lerner

Entrepreneurial Management
→More Publications

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More from the Authors
  • The Diffusion of New Technologies By: Aakash Kalyani, Marcela Carvalho, Nicholas Bloom, Tarek Hassan, Josh Lerner and Ahmed Tahoun
  • Private Equity and Workers: Modeling and Measuring Monopsony, Implicit Contracts, and Efficient Reallocation By: Kyle Herkenhoff, Josh Lerner, Gordon M. Phillips, Francisca Rebelo and Benjamin Sampson
  • Impact Investing and Worker Outcomes By: Josh Lerner, Markus Lithell and Gordon M. Phillips
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