Management innovation in leveraged buyout companies

Fabio Bertoni, Anne-Laure Le Nadant and Frédéric Perdreau ()
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Frédéric Perdreau: COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne

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Abstract: The purpose of this paper is to advance knowledge on innovation in Leveraged Buyout (LBO) companies with a particular analysis of management innovation (i.e., innovation in strategy, practices, organization and marketing). This area in innovation research is underexplored, with very few studies in the LBO context. Based on a multi-stage model of innovation, we contend that private equity firms are change agents and external knowledge sources which influence the emergence and adoption of management innovation. We thus hypothesize that, after a leveraged buyout, LBO companies should be more likely than non-LBO companies to introduce management innovations. In addition, we argue that, in order to ensure that targets can implement innovations brought by PE firms, target companies should exhibit higher-than-average absorptive capacity before the LBO. We use firm-level evidence from three rounds of the UK part of the Community Innovation Survey (CIS) to validate our hypotheses empirically. The results of the analysis support these arguments.

Keywords: Leveraged buyouts; management innovation; technological innovation; absorptive capacity; private equity; entrepreneurial finance (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

Published in Venture Capital, 2020, 22 (3), pp.261-279. ⟨10.1080/13691066.2020.1801175⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02925168

DOI: 10.1080/13691066.2020.1801175

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