Advanced Search
MyIDEAS: Login

Do Private Equity Firms Foster Innovation? Evidence from French LBOs

Contents:

Author Info

  • Anne-Laure Le Nadant

    ()
    (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)

  • Frédéric Perdreau

    ()
    (COACTIS - Université Lumière - Lyon II : EA4161 - Université Jean Monnet - Saint-Etienne)

Abstract

Agency theory has historically presented buyouts as a superior governance framework that generates economic efficiencies in the short term but these transactions might have a negative impact on long-term growth and innovation. In this study, we use a strategic entrepreneurship perspective to argue that private equity firm's extensive network and relationships, and expertise and competencies help managers to innovate. Using a propensity score methodology, we provide an empirical analysis of the innovative efforts of a sample of 89 French manufacturing firms that underwent a buyout between 2001 and 2005. The matching estimates (average treatment on the treated, ATT) of the effect of LBOs on firm level of innovation expenditures in 2006 show no significant differences between LBO targets and comparable companies that did not go through an LBO. In contrast, we find significant effects of LBOs on both service innovation and marketing innovations in design and packaging and product promotion. Results suggest that private equity firms provide marketing capabilities or encourage managers of LBO targets to build new innovation strategies.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://halshs.archives-ouvertes.fr/docs/00/77/36/93/PDF/LBOs_and_Innovation_EMNET.pdf
Download Restriction: no

Bibliographic Info

Paper provided by HAL in its series Post-Print with number halshs-00773693.

as in new window
Length:
Date of creation: Dec 2011
Date of revision:
Publication status: Published - Presented, International Conference on Economics and Management of Networks (EMNet), 2011, Limassol, Cyprus
Handle: RePEc:hal:journl:halshs-00773693

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00773693
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: Buyouts; Innovation; Private Equity Firms; Strategic Entrepreneurship;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bruining, H. & Wright, D.M., 2002. "Entrepreneurial Orientation In Management Buy-Outs And The Contribution Of Venture Capital," ERIM Report Series Research in Management ERS-2002-67-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  2. Anne-Laure Le Nadant & Frédéric Perdreau, 2006. "Financial profile of leveraged buy-out targets: some French evidence," Review of Accounting and Finance, Emerald Group Publishing, vol. 5(4), pages 370-392, November.
  3. Marco Caliendo & Sabine Kopeinig, 2005. "Some Practical Guidance for the Implementation of Propensity Score Matching," Discussion Papers of DIW Berlin 485, DIW Berlin, German Institute for Economic Research.
  4. Cumming, Douglas & Siegel, Donald S. & Wright, Mike, 2007. "Private equity, leveraged buyouts and governance," Journal of Corporate Finance, Elsevier, vol. 13(4), pages 439-460, September.
  5. Zahra, Shaker A., 1995. "Corporate entrepreneurship and financial performance: The case of management leveraged buyouts," Journal of Business Venturing, Elsevier, vol. 10(3), pages 225-247, May.
  6. Josh Lerner & Morten Sørensen & Per Strömberg, 2008. "Private Equity and Long-Run Investment: The Case of Innovation," NBER Working Papers 14623, National Bureau of Economic Research, Inc.
  7. Meuleman,M. & Amess, K. & Wright, M. & Scholes, L., 2008. "Agency, strategic entrepreneurship and the performance of private equity backed buyouts," Vlerick Leuven Gent Management School Working Paper Series 2008-05, Vlerick Leuven Gent Management School.
  8. Frank R Lichtenberg & Donald Siegel, 1989. "The Effects Of Leveraged Buyouts On Productivity And Related Aspects Of Firm Behavior," Working Papers 89-5, Center for Economic Studies, U.S. Census Bureau.
  9. Smith, Abbie J., 1990. "Corporate ownership structure and performance *1: The case of management buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 143-164, September.
  10. Boucly, Quentin & Sraer, David & Thesmar, David, 2011. "Growth LBOs," Journal of Financial Economics, Elsevier, vol. 102(2), pages 432-453.
  11. Ughetto, Elisa, 2010. "Assessing the contribution to innovation of private equity investors: A study on European buyouts," Research Policy, Elsevier, vol. 39(1), pages 126-140, February.
  12. Wright, Mike & Thompson, Steve & Robbie, Ken, 1992. "Venture capital and management-led, leveraged buy-outs: A European perspective," Journal of Business Venturing, Elsevier, vol. 7(1), pages 47-71, January.
  13. Malone, Stewart C., 1989. "Characteristics of smaller company leveraged buyouts," Journal of Business Venturing, Elsevier, vol. 4(5), pages 349-359, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-00773693. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.