The impact of private equity on firms׳ patenting activity

Amess, Kevin; Stiebale, Joel; Wright, Mike

Abstract

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.

Citation

Amess, K., Stiebale, J., & Wright, M. The impact of private equity on firms׳ patenting activity. European Economic Review, 86, https://doi.org/10.1016/j.euroecorev.2015.08.013

• Journal Article Type: Article
• Online Publication Date: Sep 14, 2015
• Deposit Date: Mar 4, 2016
• Publicly Available Date: Mar 4, 2016
• Journal: European Economic Review
• Print ISSN: 0014-2921
• Electronic ISSN: 1873-572X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 86
• DOI: https://doi.org/10.1016/j.euroecorev.2015.08.013
• Keywords: Private equity; Leveraged buyout; Entrepreneurial buyouts; Innovation
• Public URL: https://nottingham-repository.worktribe.com/output/761338
• Publisher URL: http://www.sciencedirect.com/science/article/pii/S0014292115001300
• Contract Date: Mar 4, 2016