Corporate Venture Capital as Driver of Strategic Change? An Interorganizational Learning Perspective

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Incumbent firms use corporate venture capital (CVC) as an interorganizational learning mechanism to get access to new technologies or to study and enter foreign markets. When companies adapt their product portfolios or expand their business activities geographically, strategic change takes place. Nonetheless, research still lacks an understanding of CVC's impact on both dimensions of strategic change. Building on learning theory, we examine the impact of CVC activity on product portfolio change and geographic change using a sample of 1,458 CVC units and 6,751 transactions. Our study empirically shows that technology-related CVC investments lead to subsequent product portfolio adjustments, while investments in foreign start-ups drive geographic change. Our paper also finds that these positive change effects diminish with increasing industry and cultural distance, as higher investment uncertainty and risk arise from identifying (excessively) heterogeneous knowledge. Thus, increasing distance reduces the effectiveness of interorganizational learning and impedes strategic change. However, our paper confirms that CVC represents an effective catalyst for knowledge acquisition and related strategic change, offering practical insights for firms seeking to leverage CVC as a low-cost mechanism for product and geographic diversification.