Chapter 9 - Corporate Venture Capital

Abstract

A growing number of companies in emerging economies have invested in corporate venture capital (CVC), following their peers in more advanced economies. This growing interest is likely driven by the expectation that CVCs marginal innovative output is higher than that of internal research and development (R&D). Companies that wish to invest in CVC have multiple ways to do so: they may choose to establish internal CVC groups, set up external CVC funds, or commit capital to independent VC funds. Additionally, some companies have set up accelerators and incubators, and as this chapter discusses, each organizational form has advantages and disadvantages. Next, the chapter turns to the question of whether CVC programs have been successful in spurring technological progress and innovation. Reviewing the empirical evidence, the chapter concludes that overall such programs appear to have achieved positive results in comparison with independent VCs based on indicators such as initial public offerings (IPOs) or patents. There is substantial variance across individual companies and CVC programs, however, and while some programs are purely financially motivated and more akin to independent VC, others may have broader strategic objectives. Finally, the chapter looks at CVC activity in emerging economies. Specifically, it examines the strategic orientation of Alibaba’s CVC investments. As one of China’s most active venture capitalists, Alibaba’s focus is compared with Intel’s CVC program in emerging economies.