Private value creation

Bottom-line performance improvement is the key to value creation for a private equity investor. Even before doing due diligence for a potential acquisition, private equity practitioners establish hypotheses on how to create value. They will usually focus on three factors organic growth potential, portfolio streamlining/add-on acquisitions, and cost improvement. 

Before discussing the research gap, there are several terms that need to be clarified including cooperation, coordination, integration, and collaboration value creation and value appropriation common benefits and private benefits and collaborative advantage and competitive advantage. 

Collaborative advantage is based on the relational view, which elaborates on the mechanisms of joint value creation (i.e., interfirm rent generation). It argues relational rents accrue at the collaboration level for mutual benefits. Unlike studies that acknowledge the role of both private and common benefits (Hamel 1991 Khanna et al. 1998), the relational view emphasizes common benefits that collaborative partners cannot generate independently. 

In contrast, collaborative advantage is joint competitive advantage and come from a relational rent, a common benefit that accrues to collaborative partners (Dyer and Singh 1998). This type of rent cannot be generated individually by either collaborative partner. In addition, Lavie (2006) model extends prior research on joint value creation in dyadic alliance by considering unilateral accumulation of spillover rents that produce private benefits. 

According to the relational view and the ERBV (Dyer and Singh 1998 Lavie 2006), the link of SCC CA (i.e., H5) focuses on the joint value creation process. Firms generate common benefits (i.e., relational rents) through supply chain collaboration. The link of CA->FP (i.e., H7) focuses on the value appropriation process. Firms improve their performance by appropriating relational rents. The direct link of SCC FP (i.e., Hs) focuses on the spillover rents (and internal rents) that generate private benefits to the focal firm, which is not related to collaborative advantage. Such private benefits directly impact firms performance. 

The World Bank also reports that the carbon market and associated emerging markets for clean technology and commodities have attracted a significant response firom the capital markets and from experienced investors, including those in the United States. Analysts estimated that US 11.8 billion ( 9 billion) had been invested in 58 carbon funds as of March 2007 compared to US 4.6 billion ( 3.7 billion) in 40 funds as of May 2006. Fifty percent of all capital driven to the carbon value chain is managed from the UK. Most of the newly raised money, of private origin, came to the sell-side (project development and carbon asset creation) which currently represents 58% of the capitalization. 

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