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The Effect of Leverage Buyouts on Innovation (view source)
Revision as of 16:58, 10 July 2020
, 16:58, 10 July 2020→JF Rejection
'''I have also read your paper and found a lot to like about it.''' However, I was not able to convince myself to overrule the concerns raised by the reviewing team. I have therefore decided to reject your paper.
'''My notes:'''
*The last comment from the AE is rather strange (and makes it unlikely that the AE was Josh). We discussed the R&D data fairly extensively.
*The main weakness was the "opaqueness of the methodology". We need to fix this.
*One instrument would be withdrawn LBOs, providing that they were withdrawn due to a change in market conditions, and not their innovation profile (C.f. Bernstein? -- his job market paper was on withdrawn IPOs and landed him a job at Stanford in around 2012).
'''Select comments from Reviewer 1''' (uses terminology like 'forward citation' and doesn't understand 'synthetic controls'):
#the authors’ description of the “myopic based theory” is contradictory. I don’t see how they conclude that the treatment effect of an LBO would be to curtail innovation activities. One of their main points leading to the argument is that Bernstein (2015) shows lower innovation in public firms.
#The writing is at times confusing and contradictory. For example, in pg 13 it is not clear what the authors mean by “We also require each LBO to be matched to a control firm in the same industry, operating at approximately the same tie, and holding within 20% of the LBO target firm’s patent stock…” Do you mean to say that matched firms co-own 20% of the patents of the LBO target?
'''My Notes''':
*Agree with point 3. Let's de-emphasize the methodology and instead emphasize the corporate innovation decisions.
*Clean up the description of the sample, etc.
*Let's strip down and/or clean up the theories. They aren't the main selling point. We just need a value creation story and a value consumption story.
Select comments from Reviewer 2 (likely one of Lerner, Sorenson, or Stromberg):
'''My notes''':
*We aren't going to change the identification strategy but lets up the '''discussion of identification challenges''' and "acknowledge the [endogeneity] challenge[s] and avoid overstatements".*Let's remove the "non-obvious statements that are not backed by any references" and instead make it a list of references. Just substitute boring for concisely informative and we are good to go!*'''Lerner et al. did adjust for citation inflation'''. Either I misread it, or was looking at a different version of the paper. *Rather than using "material" let's just provide the asset cut-off again.*Add the 'not' in does NOT drive our results! The HBS Working paper version of Lerner et al (in dropbox) on p16 says: "We observe a clear increase in the average number of citations for the patents granted to the private equity-backed firms. In part, this may reflect the increasing importance of patents in later years, but it may also reflect two other changes. As the pace of patenting world-wide accelerates, the frequency of patent citations has increased. Furthermore, as private equity investments in hightechnology industries become more common, the representation of patents in technologically dynamic industries has grown. Figure 3 captures these trends, and this figure shows a clear increase in the average number of citations, as well as the dispersion of citations, for the matching patents. Hence, it is important to control for the timing of the patent grant and its technology class. To address this concern, Table 2 also reports the relative citation counts. These are calculated as the number of citations in the calendar year of the grant and the three calendar years thereafter (citation count) less the average number of citations during this period to matching patents, which have the same grant year and primary USPTO class."
=Version 2=
