The impact of big tech corporate venture capital investments on innovation: Evidence from the equity investment market

Abstract

Big technology companies have undeniably left an indelible mark on society, shaping it with their groundbreaking products and services. However, concerns have arisen regarding their market dominance and the potential stifling of competition and innovation, resulting in the formation of ominous “kill zones.” As a response to these concerns, regulatory scrutiny has intensified. To contribute to a better understanding of this issue, this paper introduces a distinctive dataset encompassing the years from 2010 to 2018, drawing from the Chinese equity investment market. We conduct an empirical analysis to examine the impact of corporate venture capital investments made by tech giants on the innovation of the recipient firms. Our results unveil a positive and notable influence of these investments on innovation, particularly in the domain of substantial innovations such as invention patents. Additionally, we delve into the underlying mechanisms propelling this effect, identifying that the innovation incentives of tech behemoths primarily stem from the infusion of financial resources, technological synergies, and a wealth of diversified knowledge accrued through joint investments. These findings bear significant implications for policymakers and regulators who must delicately balance the scales of competition and innovation within the technology sector.