Corporate Venture Capital

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Corporate venture capital (CVC) is defined as an equity investment by an established corporation in privately held entrepreneurial ventures. The phenomenon involves the following players: the parent corporation; the corporate venture capital unit; and the entrepreneurial ventures. The corporation launches a CVC unit with the goal of realizing financial and/or strategic objectives. Through its investment in entrepreneurial ventures, the corporation deploys financial, technological, and managerial resources. From the venture’s perspective, CVC-backing is an important source not only for capital but also for advice and complementary assets. Finally, the CVC unit plays an important role of linking the incumbent corporation and entrepreneurial ventures. To that end, the CVC unit utilizes the parent corporation’s resources and knowledge to select and nurture ventures. The unit also helps the parent corporation to realize its financial and strategic objectives. The existing body of work offers various insights. There are studies that focus on the startups and others investigate the corporations that fund them, as well as the CVC units that are responsible for this activity. These studies underscore the antecedents to CVC investments and the consequences to the parent corporation. Similarly, extant works offer a nuanced understanding of startups’ decision to seek CVC-backing and the implications of that. A close reading of the CVC articles below also charts avenues for future work. For example, the interaction between CVC investments and other external venturing activities has received some attention yet there is an opportunity to further understand how does a firm choose among these options and further integrates among them. The structure and governance of CVC units is found to play a key role in shaping incumbents and startups outcomes, yet data limitation implies that systematic analysis is lacking. From the venture perspective, extant studies generate conflicted results regarding whether CVC-backing can improve ventures’ innovation and growth. Future works can further explore the benefits and costs of CVC-backing, and the net effects on ventures. Finally, it is important to note that the vast majority of the articles study CVC investments by US (and, sometimes European) corporations in selected industries (e.g., pharmaceuticals, medical devices, semiconductors, telecommunication) during two decades (the 1990s and 2000s). It follows that our understanding of CVC objectives and impacts are calibrated for a particular setting. As CVC practices are undertaken by corporations in other industries (food, finance, energy, etc.) and further diffuse to other parts of the world, it is crucial that one should revisit implicit assumptions and keep an open eye for new patterns and implications.