Morten Sorensen

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

Coauthor(s): J. Lerner, Per Stromberg.

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Abstract:

A long-standing controversy is whether leveraged buyouts (LBOs) relieve managers from short-term pressures from public shareholders, or whether LBO funds themselves sacrifice long-term growth to boost short-term performance. We examine one form of long-run activity, namely, investments in innovation as measured by patenting activity. Based on 472 LBO transactions, we find no evidence that LBOs sacrifice long-term investments. LBO firm patents are more cited (a proxy for economic importance), show no shifts in the fundamental nature of the research, and become more concentrated in important areas of companies' innovative portfolios.

The PDF available here is the pre-peer reviewed version of the article published in final form at The Journal of Finance.

Source: The Journal of Finance
Exact Citation:
Lerner, Josh, Morten Sorensen, and Per Stromberg. "Private Equity and Long-Run Investment: The Case of Innovation." The Journal of Finance 66, no. 2 (April 2011): 445-477.
Volume: 66
Number: 2
Pages: 445-477
Date: 4 2011