The Evolution and Strategic Positioning of Private Equity Firms

Abstract

This paper explores the evolution and strategic positioning of private equity firms (general partners) themselves (versus previous research focused on buyout portfolio firm implications). Specifically, we provide a conceptual configuration of private equity firms along two dimensions: their financial structure emphasis (the strategic use of debt versus equity among private equity portfolio firms) and the diversified scope of their portfolio firms. Using these dimensions, we create a typology classifying private equity firms into short-term efficiency niche players, niche players with long-term equity positions, diversified players with focused groups of portfolio firms, and short-term diversified efficiency-oriented players. We also use resource dependence theory and resource-based theory to form our model, and discuss theoretical and managerial implications as well as public policy suggestions.

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