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Safer working in companies owned by venture capitalists

Monday, 26 March 2012
Employees in companies owned by private equity firms have significantly lower risk of unemployment and better wages according to a recent study.
Anyone who works in a company owned by a private venture capital is 13 percent less likely to lose their job than workers in other companies.

The effect lasts for up to four years after that time the private equity firm steps in a study of 201 private equity firms in Sweden during the years 1998-2004 show

The Institute of Industrial Research which carried out the study points that "Our study indicates that the Swedish venture capital market has not profited at the expense of the employees. On the contrary, it seems to have prevented unemployment and thereby contributed to the employees' advantage, especially in the case of the weakest groups in the labour market, "writes the author Martin Olsson and Joacim Train.

The study also finds that wages grew by 1.4 percent more than in comparable companies over four years of private equity control. The effect was widespread across the wage scale.

The report authors believe that better access to capital for private equity-owned companies are the most likely explanation for why the risk of unemployment for employees decreases. The theory is supported by the threat that unemployment fell more in companies operating in capital intensive industries.

"A credible explanation for the reduced risk of unemployment is that venture capital investment brought new capital to firms, thereby facilitating new investment and development of the business, "writes Martin Olsson and Joacim Train.
 By Team

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