The Hidden Agenda Behind Markets for Technology: Do firms seek knowledge beyond partners?

Abstract

In this paper, we aim to better understand why firms enter inter-organizational relationships. Previous studies have shown that firms engage in partnerships to internalize knowledge from its partners. We extend the literature by showing that firms also form inter-firm ties to acquire knowledge from their partner's alliance portfolio. Using VentureXpert and SDC Platinum databases, our baseline findings show that corporate venture capitals (CVCs) are more likely to invest in an entrepreneurial firm when it has an alliance portfolio. Further, we find that our baseline findings are stronger in industries with weak intellectual property protection (IPP) regimes and when the venture firm's alliance partner operates in a similar industry with the CVC. To resolve endogeneity concerns, we provide an additional analysis differentiating investor types. Collectively, our paper indicates that, under certain contingencies, firms engage in inter-firm relationships to learn from the partner's alliance portfolio.