Innovation in Swedish Companies: The Effect of Private Equity Ownership

University essay from Handelshögskolan i Stockholm/Institutionen för finansiell ekonomi

Abstract: In the debate on value-creation in private equity, advocates commonly mention the long-term perspective as an advantage; thus the capital does not see the same quarterly pressure from shareholders as on the public markets. However, does this imply that private equity firms can invest more money in innovation, and hence create even more value in the future? We have analyzed this from 65 private equity investments in Sweden ranging from the year 2000 to 2015, using patents as a proxy for innovation. We found no evidence that private equity firms invest more in innovation than previous owners - rather the opposite seems to be prevalent. Private equity firms, however, are being slightly more successful in the outcome, hence quality, of their patent applications.

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