This paper comes to us from Josh Lerner, Professor of Finance at Harvard Business School; Morten Sørensen of the Finance Department at Columbia University; and Per Strömberg of the Finance Department at the University of Chicago and the Stockholm School of Economics.
In the paper Private Equity and Long-Run Investment: The Case of Innovation, forthcoming in the Journal of Finance, we examine the changes in patenting behavior of 495 firms with at least one successful patent application filed in the period from three years before to five years after being part of a private equity transaction. A long-standing controversy is whether LBOs relieve managers from short-term pressures from public shareholders, or whether LBO funds themselves are driven by short-term profit motives and sacrifice long-term growth to boost short-term performance.
