Organizational Slack and Innovation Expenditures in Leveraged Buyout Companies
, Anne-Laure Le Nadant
, Frédéric Perdreau
2021, Finance Contrôle Stratégie, 24-2
Abstract
We study leveraged buyouts (LBOs) to understand how actual and potential organizational slack affect exploitative and exploratory innovation expenditures. LBO companies are characterized by limited actual and high potential organizational slack and, based on theories of organizational search, we predict that both exploitative and explorative innovation expenditures be higher in LBO companies than in non-LBOs. These differences also depend on the technology intensity of the sector in which the target firm operates. The empirical analysis of 882 LBO companies in the UK community innovation survey broadly supports this argument.