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The role of private equity investments on exports: Evidence from OECD countries

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  • Herrera-Echeverri, Hernan
  • Nandy, Debarshi K.
  • Fragua, Daniel

Abstract

We analyze the impact of private equity (PE) investments (both venture-backed and buyout deals) on export performance in a cross-country setting. Using a comprehensive database of 22 OECD countries and 12 aggregated industries, we find that PE has a positive effect on export density and export market share. We confirm this finding after controlling for potential endogeneity issues using an IV framework. This impact is deeper in industries with higher productivity, value-added, and infrastructure availability. The outcomes are similar when local and foreign PE activity are considered, although foreign PE activity shows greater capacity to generate exports in the host country. Moreover, foreign PE activity enhances the capability of local PEs to generate additional exports, showing a complementary effect. Finally, country-specific characteristics such as trade freedom and institutional quality have a greater impact in generating exports when PE activity is higher. Our results have policy implications regarding access to foreign VC and PE investment in emerging economies.

Suggested Citation

  • Herrera-Echeverri, Hernan & Nandy, Debarshi K. & Fragua, Daniel, 2022. "The role of private equity investments on exports: Evidence from OECD countries," Journal of Multinational Financial Management, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:mulfin:v:65:y:2022:i:c:s1042444x2200010x
    DOI: 10.1016/j.mulfin.2022.100739
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    More about this item

    Keywords

    Exports; Export density; Private equity; Venture capital; Foreign investment;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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