Prof. Francesco Castellaneta had his paper “DOES OWNERSHIP MATTER IN PRIVATE EQUITY? THE SOURCES OF VARIANCE IN BUYOUTS’ PERFORMANCE accepted for publication at the Strategic Management Journal. In this paper, the authors study the impact of ownership on firm performance in an unexplored governance context: private equity (PE) firms and the buyouts in which they invest. The authors analyze a unique database of 6,950 buyouts realized by 255 PE firms between 1973 and 2008 in 77 countries. The results document that the PE firm effect explains a significant portion of variance (4.6%) in buyouts’ performance. This result implies that PE firms are endowed with heterogeneous resources, like competences, assets, information, and knowledge, and that some PE firms have significantly better resources than others. The authors also find that the importance of the PE firm effect will grow as time passes. Therefore, differences between PE firms’ resources are likely, not only to be long-lived (due to the heterogeneity and low mobility of resources across PE firms), but also to increase (due to organizational inertia). The authors also find that three contingencies increase the importance of the PE firm effect: (a) value addition vs. selection strategies; (b) developed vs. emerging economies; and (c) economic downturns. These findings shed new light on the sources of variance in buyouts’ performance.
Posted on: Sat, 20 Sep 2014 22:35:11 +0000
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