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We investigate whether active involvement of private equity firms in their portfolio companies during the holding period of a later-stage private equity investment is related to increased levels in operating performance of these companies. Our analysis of unique survey data on 267 European buyouts and secondary performance data on 29 portfolio companies using partial least squares structural equation modeling indicates that private equity firms, that is, their board representatives, can increase operating performance not only by monitoring the behavior of top managers of portfolio companies, but also by becoming involved in strategic decisions and supporting top managers through the provision of strategic resources. Strategic resources, in particular expertise and networks, provided by private equity firm representatives in the form of financial and strategic involvement are associated with increases in the financial performance and competitive prospects of portfolio companies. Operational involvement, however, is not related to changes in operating performance. In addition to empirical insights into the different types of involvement and their effects, this chapter contributes to the buyout literature by providing support for the suggested broadening of the theoretical discussion beyond the dominant perspective of agency theory through developing and testing a complementary resource-based view of involvement. This allows taking into account not only the monitoring, but also the more entrepreneurial supporting element of involvement by private equity firms.

Management buyout (MBO) is a specialized form of acquisition with different motives. Sometimes, there are initiatives taken by the senior management to bailout the firm from sickness. The predominant agency theory focuses only on the governance issues in the MBO firms and this theory can be applied to understand how managerial discretion can play vital roles in mitigating value destruction in the post-MBO firm. A CEO-led MBO is presumed to be greed-driven (Bebchuk, L., Cremers, M., & Peyer, U. (2011). The CEO pay slice. Journal of Financial Economics, 102, 199–221.). But a senior management team-led MBO is said to be a socialistic move. By default, MBOs are debt-driven, unless the buying management team is financially affluent, which may be rare, considering the price for the buyout. Private equity (PE) players play a dominant role in providing and or arranging funds in the form of equity and or debt. There is a notion that the PE investors help promote entrepreneurial and modern management practices. The MBO target firm has to ensure returning the entire money back to the sponsors within the shortest possible time out of the operational cash flow. Therefore, various issues like identifying a target firm, sourcing mix of finance, MBO price determination, value creation and value delivery to all stakeholders are all important for understanding the subject. This chapter attempts to construct a robust model for structuring MBO to ensure value fairness to all parties involved in the transaction.

Purpose – Although there is extensive work on labor mobility, research on entrepreneurial mobility is fragmented and many aspects are largely neglected. We develop a framework for analysis that integrates different perspectives on entrepreneurial mobility to provide a broad agenda for future research.

Design/methodology – We build upon the strategic entrepreneurship, entrepreneurial behaviour theory, resource-based theory and other literatures, to distinguish four quadrants involving high and low geographical mobility and high and low organizational mobility.

Findings – Within each quadrant we identify different types of entrepreneurial mobility, specifically habitual entrepreneurs, management buyouts, university spin-offs, returnee entrepreneurs and transnational entrepreneurs. Issues concerning the development of research programs and methods, with particular emphasis on datasets, are discussed.

Originality/value – It is hoped that this chapter will spur entrepreneurship and strategy scholars to recognize that the scope of the entrepreneurial mobility concept is considerably greater than hitherto appreciated, providing interesting new avenues for theoretical and methodological development in this area.

Private equity has acquired multiple large nursing home chains within the past few years; by 2007, it owned 6 of the 10 largest chains. Despite widespread public and policy interest, evidence on the purported impact of private equity on nursing home performance is limited. In our review, we begin by briefly reviewing the organizational and environmental changes in the nursing home industry that facilitated private equity investments. We offer a conceptual framework to hypothesize the relationship between private equity ownership and nursing home performance. Finally, we offer a research agenda focused on the important parameters of nursing home performance: financial performance, and quality of care.

As FDI flows grew in volume and complexity in the 1990s and early 2000s, three new players appeared on the global stage: sovereign wealth funds (SWFs), which were government-controlled entities with the authority to take significant equity stakes in foreign firms; private equity (PE) firms, which resorted increasingly to cross-border acquisitions, and emerging-market multinational enterprises (EMNEs), which ratcheted up their overseas acquisitions and investments. While none of these players was entirely new, each became more visible in the 2000s. Looking ahead, we anticipate that SWFs will continue to be marginal FDI players, with a few exceptions, despite their high visibility; that PEs will play a highly volatile role, varying from marginal at times to important at others; and that only EMNEs were already quite important in 2009 and likely to gain in importance, as emerging economies become prime movers of the global economy. The global financial crisis of 2008–2009 may thus only have speeded up the inevitable rise of emerging economies as both sources and destinations for FDI. We further conclude that EMNEs will contribute significantly to sustainable development because of their distinctive capabilities in making and selling products for low-income customers, and their emerging competence in “green” technologies.

Firms operate in a market for their corporate assets, wherein important assets being bought and sold are business units. This market is therefore a primary mechanism for firm reconfiguration, and offers the opportunity for firms to gain performance advantage as they prepare for and engage in their boundary-changing moves. This paper focuses on resource reconfiguration between firms, and examines internally and externally driven sources of performance heterogeneity in firms’ use of the market for firm reconfiguration. Viewing between-firm resource reconfiguration through three theoretical lenses surfaces several potential avenues for firm differentiation. For one, the necessity of firms’ possessing capabilities to execute both sides of the external resource reconfiguration transaction – acquisition and divestiture capabilities – is revealed. For another, the institutional prerequisites that are needed in the operating environment for a firm to build a sustainable resource reconfiguration strategy are brought to the fore, and are well illustrated by the private equity industry. Lastly, the potential benefits of using the transactional view of firm scope to animate the study of external resource reconfiguration are raised. Taken together, these elements lead to a research agenda around resource reconfiguration across firm boundaries.

U.S. venture capital financings of U.S. entrepreneurial firms with up to 213 observations are consistent with the proposition that convertible preferred equity is the optimal form of venture capital finance. This paper introduces new evidence from 208 U.S. venture capital financings of Canadian entrepreneurial firms. In contrast to U.S. venture capital investments in U.S. entrepreneurial firms, U.S. venture capitalists finance Canadian entrepreneurial firms with a variety of forms of finance. The differences between domestic and international U.S. venture capitalist financing structures are not attributable to differences in the definition of the term ‘venture capital’. The data point to the importance of institutional determinants of venture capitalist capital structures within the U.S. and abroad. Among other things, the data indicate that U.S. venture capitalists often do not choose convertible preferred shares in the absence of tax considerations in favor of that financing vehicle.

Financial analysts act as crucial conduits of information between firms and stakeholders. However, comparatively little is known about how these information intermediaries evaluate the believability and importance of corporate disclosures. We argue that a firm’s level of managerial discretion, or latitude of executive action, acts as a cue for financial analysts, which helps them interpret and respond to voluntary management earnings forecasts. Our study provides strong, robust evidence that financial analysts find management forecasts significantly less believable in low-discretion than in high-discretion environments, and therefore tend to be much less responsive to these forecasts. We also show that managerial discretion is especially impactful on analysts’ responses in those circumstances where analysts are typically most uncertain about how to interpret management forecasts.

This study examines the effect of employees' perceptions of political connections on performance measurement systems (PMS) design choice and firm performance. In addition, this study explores the moderating effect of social networking, a very common and widely used factor by domestic and foreign multinational firms operating in China, and its joint effect with political connections or PMS design choice on firm performance. We collected survey responses from a sample of 110 managers from manufacturing firms in China. Our results reveal that highly politically connected managers use nonfinancial measures, leading to improved firm performance. Our results suggest that social networking interacts significantly with political connections, and nonfinancial and financial measures on firm performance. The theoretical and practical implications of our findings are discussed.