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Essays on Business Model Innovation in the Private Equity Industry.

Record Type:	Language materials, manuscript : Monograph/item
Title/Author:	Essays on Business Model Innovation in the Private Equity Industry./
Author:	Sen, Prothit.
Description:	1 online resource (167 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 81-03, Section: A.
Contained By:	Dissertations Abstracts International81-03A.
Subject:	Business administration. -
Online resource:	click for full text (PQDT)
ISBN:	9781085733496

Essays on Business Model Innovation in the Private Equity Industry.
Sen, Prothit.

Essays on Business Model Innovation in the Private Equity Industry. - 1 online resource (167 pages)

Source: Dissertations Abstracts International, Volume: 81-03, Section: A.

Thesis (Ph.D.)--INSEAD (France and Singapore), 2019.

Includes bibliographical references

This dissertation comprises three essays on adoption of business model innovations. By analyzing the transition of global private equity (PE) firms to a novel investment model of "add-on deals", the essays explain which firm characteristics determine heterogeneity in the adoption of new business models between firms, what are the most viable modes of adoption and the impact of this adoption on a firm's stock market performance.Essay 1 (in collaboration with Phanish Puranam) identifies characteristics of firms that make them more or less likely to adopt a business model innovation. In two studies where we analyze a business model transition called "add-on" deals in the global PE industry (over 50,000 PE deals between 1990 and 2016), we first test existing theoretical predictions (albeit nascent), induce refinements to existing theory using machine learning techniques and test the extended theory in a hold-out sample. The key insight from our analyses is that adoption of a business model innovation, particularly one that is largely dependent on capabilities embedded in human capital, will be reliant on inorganic modes (e.g., active corporate participation as co-investor in a PE deal) and will be impeded by the extent of routinization of the conventional business model (i.e., capabilities related to conventional leveraged buyouts or LBOs).Essay 2 is motivated by the finding that co-investors play a critical role in the adoption of add-on deals and demonstrates how alliance portfolios (e.g., group of co-investors of a PE firm) adapt to a change in the firm's business model. By analyzing the heterogeneity in participation of different types of co-investors between add-on deals and LBOs, I find that ties which get institutionalized are sources of technical capabilities (e.g., corporates in add-on deals) as opposed to providers of financial capital (e.g., banks for LBOs). Further, the participation of a partner is contingent not only on the competence requirements of the focal firm but the prospective participation of others in the portfolio. These findings point towards an inter-organizational network perspective of alliance portfolios which must involve a) from the perspective of the focal firm, varied rules of engaging with partners depending upon the requirements of the business model, and b) a simultaneous process of multi-sided matching of possibly heterogeneous partner preferences.In Essay 3 (in collaboration with Daniel A. Bens), we first document the following asymmetry in the expected performance of add-on deals: negative stock abnormal returns upon announcement (market reaction) yet a near certainty of deal closure (management expectation). To explain this, we argue that business model alterations, despite having sound strategic logic, can be relatively opaque to customers (PE investors). As a result, they may perceive the innovation (the add-on model) to be an illegitimate deviation from an established product category. Therefore, the new business model should be optimally distinct such that the penalty for perceived category non-conformity is mitigated. In particular, its adoption a) should not coincide with radical alterations to other attributes of the firm, and b) should be focused in conventionally proven market segments of the firm.

Electronic reproduction.
Ann Arbor, Mich. :
ProQuest,
2024

Mode of access: World Wide Web

ISBN: 9781085733496Subjects--Topical Terms:

1148568
Business administration.
Subjects--Index Terms:

Algorithmic inductionIndex Terms--Genre/Form:

554714
Electronic books.

Essays on Business Model Innovation in the Private Equity Industry.
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504 $a Includes bibliographical references
520 $a This dissertation comprises three essays on adoption of business model innovations. By analyzing the transition of global private equity (PE) firms to a novel investment model of "add-on deals", the essays explain which firm characteristics determine heterogeneity in the adoption of new business models between firms, what are the most viable modes of adoption and the impact of this adoption on a firm's stock market performance.Essay 1 (in collaboration with Phanish Puranam) identifies characteristics of firms that make them more or less likely to adopt a business model innovation. In two studies where we analyze a business model transition called "add-on" deals in the global PE industry (over 50,000 PE deals between 1990 and 2016), we first test existing theoretical predictions (albeit nascent), induce refinements to existing theory using machine learning techniques and test the extended theory in a hold-out sample. The key insight from our analyses is that adoption of a business model innovation, particularly one that is largely dependent on capabilities embedded in human capital, will be reliant on inorganic modes (e.g., active corporate participation as co-investor in a PE deal) and will be impeded by the extent of routinization of the conventional business model (i.e., capabilities related to conventional leveraged buyouts or LBOs).Essay 2 is motivated by the finding that co-investors play a critical role in the adoption of add-on deals and demonstrates how alliance portfolios (e.g., group of co-investors of a PE firm) adapt to a change in the firm's business model. By analyzing the heterogeneity in participation of different types of co-investors between add-on deals and LBOs, I find that ties which get institutionalized are sources of technical capabilities (e.g., corporates in add-on deals) as opposed to providers of financial capital (e.g., banks for LBOs). Further, the participation of a partner is contingent not only on the competence requirements of the focal firm but the prospective participation of others in the portfolio. These findings point towards an inter-organizational network perspective of alliance portfolios which must involve a) from the perspective of the focal firm, varied rules of engaging with partners depending upon the requirements of the business model, and b) a simultaneous process of multi-sided matching of possibly heterogeneous partner preferences.In Essay 3 (in collaboration with Daniel A. Bens), we first document the following asymmetry in the expected performance of add-on deals: negative stock abnormal returns upon announcement (market reaction) yet a near certainty of deal closure (management expectation). To explain this, we argue that business model alterations, despite having sound strategic logic, can be relatively opaque to customers (PE investors). As a result, they may perceive the innovation (the add-on model) to be an illegitimate deviation from an established product category. Therefore, the new business model should be optimally distinct such that the penalty for perceived category non-conformity is mitigated. In particular, its adoption a) should not coincide with radical alterations to other attributes of the firm, and b) should be focused in conventionally proven market segments of the firm.
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538 $a Mode of access: World Wide Web
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650 4 $a Finance. $3 559073
653 $a Algorithmic induction
653 $a Alliance networks
653 $a Business model innovation
653 $a Corporate re-configuration
653 $a Firm performance
653 $a Private equity
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