We investigate the role of private equity (PE) investors as an intermediary to digital technology adoption in private firms. We document that the adoption of digital technologies is related to better portfolio company growth. Using an exogenous innovation in artificial intelligence (AI), the development of AlexNet, we find that PE investors (i) shift their target investments to firms that are likely to be impacted by AI and (ii) increase their existing portfolio firms’ digital technology investments. Overall, we highlight the role of PE investors as an important intermediary for enhancing private firm technology adoption.
Brian Baik, Harvard Business School
Wilbur Chen, HKUST Business School
Suraj Srinivasan, Harvard Business School