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Private Equity and the Innovation Strategies of Entrepreneurial Firms: Empirical Evidence from the Small Business Innovation Research Program

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Author Info

  • Link, Albert N.

    ()
    (University of North Carolina at Greensboro, Department of Economics)

  • Ruhm, Christopher J.

    ()
    (University of Virginia)

  • Siegel, Donald S.

    ()
    (University at Albany, SUNY)

Abstract

There is great interest in evaluating the impact of private equity investments on innovation and economic growth. However, there is no direct empirical evidence on the effects of such transactions on the innovation strategies of entrepreneurial firms. We fill this gap by examining a rich project-level data set consisting of entrepreneurial firms receiving Small Business Innovation Research (SBIR) program research awards. We find that SBIR firms attracting private equity investments are significantly more likely to license and sell their technology rights and engage in collaborative research and development agreements. Our results suggest that private equity investments accelerate the development and commercialization of research-based technologies, thus contributing to economic growth. We conclude that both public investments and private investments are key to innovation performance.

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Bibliographic Info

Paper provided by University of North Carolina at Greensboro, Department of Economics in its series Working Papers with number 12-9.

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Length: 26 pages
Date of creation: 02 Aug 2012
Date of revision:
Handle: RePEc:ris:uncgec:2012_009

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Keywords: Private equity; Innovation; Entrepreneurship; SBIR;

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References

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  1. Frank R Lichtenberg & Donald Siegel, 1989. "The Effects Of Leveraged Buyouts On Productivity And Related Aspects Of Firm Behavior," Working Papers, Center for Economic Studies, U.S. Census Bureau 89-5, Center for Economic Studies, U.S. Census Bureau.
  2. Steven Davis & John Haltiwanger & Ron Jarmin & Josh Lerner & Javier Miranda, 2008. "Private Equity and Employment," Working Papers, Center for Economic Studies, U.S. Census Bureau 08-07r, Center for Economic Studies, U.S. Census Bureau, revised Oct 2011.
  3. 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.
  4. Richard Harris & Donald S. Siegel & Mike Wright, 2003. "Assessing the Impact of Management Buyouts on Economic Efficiency: Plant-Level Evidence from the United Kingdom," Rensselaer Working Papers in Economics, Rensselaer Polytechnic Institute, Department of Economics 0304, Rensselaer Polytechnic Institute, Department of Economics.
  5. Dora Gicheva & Albert Link, 2013. "Leveraging entrepreneurship through private investments: does gender matter?," Small Business Economics, Springer, Springer, vol. 40(2), pages 199-210, February.
  6. Steven J. Davis & John C. Haltiwanger & Kyle Handley & Ron S. Jarmin & Josh Lerner & Javier Miranda, 2013. "Private Equity, Jobs, and Productivity," NBER Working Papers 19458, National Bureau of Economic Research, Inc.
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Cited by:
  1. Bozeman, Barry & Link, Albert N., 2014. "Toward an Assessment of Impacts from U.S. Technology and Innovation Policies," Working Papers, University of North Carolina at Greensboro, Department of Economics 14-5, University of North Carolina at Greensboro, Department of Economics.
  2. Leyden, Dennis & Link, Albert, 2014. "Toward a Theory of the Entrepreneurial Process," Working Papers, University of North Carolina at Greensboro, Department of Economics 14-4, University of North Carolina at Greensboro, Department of Economics.

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