The impact of private equity on firms׳ patenting activity
Amess, Kevin and Stiebale, Joel and Wright, Mike (2015) The impact of private equity on firms׳ patenting activity. European Economic Review, 86 . pp. 147-160. ISSN 0014-2921
The paper analyses the impact of private equity (PE) backed leveraged buyouts (LBOs) on innovative output (patenting). Using a sample of 407 UK deals we find that LBOs have a positive causal effect on patent stock and quality-adjusted patent stock. Our results imply a 6% increase in quality-adjusted patent stock three years after the deal. The increase in innovative activity is concentrated among private-to-private transactions with a 14% increase in the quality-adjusted patent stock. We also find evidence suggesting that PE firms facilitate the relaxation of financial constraints. In sum, our findings suggest that PE firms do not promote short-term cost-cutting at the expense of entrepreneurial investment opportunities with a long-term pay-off.
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