Publications
Publications
- 2024
- HBS Working Paper Series
Private Equity and Digital Transformation
By: Brian K. Baik, Wilbur Chen and Suraj Srinivasan
Abstract
We study the role which private equity (PE) plays in digital transformation. We find that PE investment is associated with greater investments into portfolio firm’s digital technologies, as measured by IT expenditures and the hiring demand for AI skills. This relationship is more pronounced for growth equity investments, and portfolio firms invested by PE investors with greater exposure and expertise in digital technology. Consistent with the broad range of applications for digital technologies, non-IT portfolio companies also significantly increase their digital investments post PE investment. Lastly, we study the potential benefits from digital investments, and find that an increase in these investments after PE entry, is associated with stronger portfolio firm sales/employee growth and innovation. Overall, our results highlight that PE investors increasingly drive value creation using digital technologies in their portfolio companies.
Keywords
Digital Transformation; Private Equity; Selection and Staffing; Investment Portfolio; Value Creation
Citation
Baik, Brian K., Wilbur Chen, and Suraj Srinivasan. "Private Equity and Digital Transformation." Harvard Business School Working Paper, No. 24-070, May 2024.