Book Review: Private Equity at Work: When Wall Street Manages Main Street

FinalPrivateEquity-ApplebaumBattGrab a mug of your favorite hot beverage and put those slippered feet up for a well-deserved weekend read!

Eileen Appelbaum, Rosemary Batt : Private Equity at Work: When Wall Street Manages Main Street. New York: Russell Sage Foundation, 2014. 396 pp. $35.00, paper.

Michael Jensen of University of Michigan Ann Arbor recently reviewed “Private Equity at Work: When Wall Street Manages Main Street” by Eileen Appelbaum, Rosemary Batt in Administrative Science Quarterly.

Private Equity at Work is a wonderful introduction to private equity. Using a mixture of simplifying models, aggregate ASQ_v59n4_Dec2014_cover.indddescriptive data, published statistical analyses, and detailed case studies, Applebaum and Batt provide a comprehensive examination of private equity and its role in the U.S. economy and society. The authors propose that “the private equity business model represents a test of the notion that pursuing shareholder value aggressively is a good thing by putting the shareholders even more in charge” (p. 4). Although they question the value of private equity for anybody but the general partners running private equity funds, their critical approach to private equity is nevertheless a remarkably fair and balanced evaluation of private equity’s advantages and disadvantages.

Click here to read the rest of the review from Administrative Science Quarterly. Want to know when all the latest reviews and research articles are available from Administrative Science Quarterly? Click here to sign up for e-alerts!

Sparking a Revolution In Clean Energy?

Editor’s note: We are pleased to welcome Alfred Marcus of the University of Minnesota, whose article “The Promise and Pitfalls of Venture Capital as an Asset Class for Clean Energy Investment: Research Questions for Organization and Natural Environment Scholars,” co-authored by Joel Malen of the University of Minnesota and Shmuel Ellis of Tel Aviv University, was published in the Organization & Environment March 2013 issue.

UntitledI wanted to know if venture capital (VC) could spark a revolution in clean energy like it sparked a revolution in information technology. What was the potential of this type of funding for clean energy and what were the limitations? Undoubtedly funding was rising rapidly but would VC be as transformative in this area as it was in information technology? Could it spawn great companies and change the way we live?

oaeThe persistence of VC funding of clean energy given that the payoffs are hard to achieve and the fact that VCs have under a decade to achieve these payoffs is  surprising. The first decade of the 21st century was not a good one for VCs. IPOs and exits were down and the VCs thrive in an era when these are rising. Moreover, many of the good opportunities in other areas in which they had invested like information and medical technology were no longer as vibrant or as promising. That they moved into clean energy and stuck with it to the degree that they did was surprising.

If we are concerned about sustainability, then we have to understand how the financing of companies that will achieve a more sustainable future will take place. These companies need long term support but VCs are not in the business of providing long term support. They provide transitional money for companies that have substantial promise but are not quite ready to commercialize their ideas. The really pioneering ideas in clean energy are only taken up by the true believers among the VCs and often their staying power in the industry is not long because the pension funds, endowments, and individual investors who provide money to the VCs need reasonable returns in a relatively short time period. Where in our society will we find the funding for long term risk taking? Without long term risk taking we will simply make incremental adjustments and miss the truly transformative potential of entrepreneurial ideas.

Read “The Promise and Pitfalls of Venture Capital as an Asset Class for Clean Energy Investment: Research Questions for Organization and Natural Environment Scholars”  in the new issue of Organization & Environment.

amarcus-120Alfred Marcus is the Edson Spencer Endowed Chair in Strategy and Technological Leadership at the Carlson School of Management and at the Technological Leadership Institute (TLI) College of Science and Engineering University of Minnesota. Professor Marcus’ research has been published by the Strategic Management Journal, the Academy of Management Journal, and other academic journals. He also is the author or editor of 15 books including Cross-Sector Leadership for the Green Economy: Integrating Research and Practice on Sustainable Enterprise (2011) and Strategic Foresight: A New Look at Scenarios (2009). He was co-editor of a special 2011 fall issue of the California Management Review on regulatory uncertainty and the natural environment.