Final published version
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Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - The More the Merrier?
T2 - Diversity and Private Equity Performance
AU - Hammer, Benjamin
AU - Pettkus, Silke
AU - Schweizer, Denis
AU - Wünsche, Norbert
PY - 2022/1/31
Y1 - 2022/1/31
N2 - This paper explores how diversity among lead partner teams (LPTs) of private equity (PE) funds affects buyout performance. We argue that there is a trade‐off between the ‘bright side’ of diversity (i.e. improved decision‐making due to a broader set of perspectives) and the ‘dark side’ (i.e. deteriorated decision‐making due to a potential for clashes and a lack of cooperation). Our theoretical framework suggests that the net effect on performance depends on whether LPTs are diverse in socio‐demographic or occupational aspects. To test this hypothesis, we develop a comprehensive index that measures LPT diversity along six dimensions. Using a sample of 241 buyouts and 547 involved PE partners, we find that higher scores in the socio‐demographic component (gender, age, nationality) are associated with higher deal returns and multiple expansions. The opposite is true for higher scores in the occupational component (professional experience, educational background, university affiliation). Further results suggest that the ‘bright side’ of diversity gets relatively more important in case of complex buyouts and uncertain deal environments.
AB - This paper explores how diversity among lead partner teams (LPTs) of private equity (PE) funds affects buyout performance. We argue that there is a trade‐off between the ‘bright side’ of diversity (i.e. improved decision‐making due to a broader set of perspectives) and the ‘dark side’ (i.e. deteriorated decision‐making due to a potential for clashes and a lack of cooperation). Our theoretical framework suggests that the net effect on performance depends on whether LPTs are diverse in socio‐demographic or occupational aspects. To test this hypothesis, we develop a comprehensive index that measures LPT diversity along six dimensions. Using a sample of 241 buyouts and 547 involved PE partners, we find that higher scores in the socio‐demographic component (gender, age, nationality) are associated with higher deal returns and multiple expansions. The opposite is true for higher scores in the occupational component (professional experience, educational background, university affiliation). Further results suggest that the ‘bright side’ of diversity gets relatively more important in case of complex buyouts and uncertain deal environments.
U2 - 10.1111/1467-8551.12456
DO - 10.1111/1467-8551.12456
M3 - Journal article
VL - 33
SP - 231
EP - 265
JO - British Journal of Management
JF - British Journal of Management
SN - 1467-8551
IS - 1
ER -