Dynamic capabilities’ functioning in a private equity-backed firm

Private equity acquisition is a source of dynamic capabilities that develop resources to both improve the target firm’s competitive advantage within the original business and create economic growth, even though they could generate more value by promoting new businesses. Private equity-backed firms adopt a focused strategy because dynamic capabilities work to generate competitive advantages in the existing businesses, feed exploitation rather than exploration, and focus on original value chain activities without integration processes. The target firm adopts responsible behavior because it is oriented to economic growth; thereby the worries about private equity-backing can be mitigated. Future quantitative works could test the results of this article on a larger sample and in industries where the economic growth is insufficient to define responsible social behavior involving crucial social needs such as health care.