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The Effect of Leverage Buyouts on Innovation (view source)
Revision as of 13:53, 10 July 2020
, 13:53, 10 July 2020→Beyond JF
*The comment on sample sizes and explaining details is fair. We need to be clearer about what the unit of observation is when we report results.
*Yes, we can look at R&D filings and we did, we just didn't include it in the write-up. The results are in Graphs-Edited.xlsx
'''Heitor Almeida''':
Very nice paper. If I remember correctly Lerner et al. did not have a control group, so the results were a bit questionable. it is nice to show that relative to a control group LBOs reduce innovation. Two quick reactions:
#The obvious endogeneity concern is that for some reason private equity will target firms that are expected to reduce innovation (that is, innovation would have decreased irrespective of the LBO). it is impossible to completely address it, but it may be useful to discuss explicitly and perhaps try to look at whether innovation "predicts" LBOs. For example, perhaps firms with low R&D are more likely to be targeted, and this reduces innovation post-LBO.
#There is an alternative measure of innovation that looks at the market value of granted patents (Kogan et al., QJE). If it is the case that LBOs reduce the total value of innovation, that would add to your points.
He also said "I think RFS is not out of reach. The issue here as you know is that the authors of the existing paper may challenge your results if it is sent to them. Hopefully, the editor will send it to someone neutral." Which makes him practically clairvoyant, given what happened when we sent it to JF.
Addressing his concerns:
*A paragraph on the many and varied endogeneity issues is a very good idea. We should have done this more properly.
*The paper (in the dropbox folder) seems to use an event study approach to isolate the stock market reaction (in terms of market cap) to a patent issue. We can't do that - it's too much work. Also almost all (85%+) of patent applications result in at least one issue, and the 'news' occurs when the patent application is made public (usually 18 months after filing), so that whole paper is pretty questionable.
Kogan, L., Papanikolaou, D., Seru, A., & Stoffman, N. (2017). Technological innovation, resource allocation, and growth. The Quarterly Journal of Economics, 132(2), 665-712.
=Version 2=
