Corporate Venture Capital Investments Research Articles

Exploring corporate venture capital investments in clean energy—a focus on the Asia-Pacific region

Climate change has been posing an increasing threat to the planet at the environmental and economic levels, and the rise of clean energy (CE) is ever more fundamental for ensuring a qualified alternative for the energy mix, attracting the financial interest of different investment entities. In this respect, the significance of corporate venture capitalists (CVCs) has been on a steady rise for every sector, even for CE, since the 1990 s, and it is shaping up to become a major force behind the worldwide innovation. The aim of this research is to investigate the essential profiles about the phenomenon regarding CVCs that are active in CE, with a focus on the Asia-Pacific (APAC) region, to understand how they act in pursuing their strategic intention. The specific contribution of this study, which adopts a quantitative approach to operate a descriptive analysis on the dynamics operating in the context under investigation by combining relating data from several institutional databases, is to provide a scenario analysis with explorative intention that may define the main characteristics, roles in innovation, and growing participation of CVCs in the CE sector, especially in the APAC area.

Stock Market Manipulation and Corporate Venture Capital Investments

Stock Market Manipulation and Corporate Venture Capital Investments

How Incumbent Firms Cope with Economic Policy Uncertainty: The Case of Corporate Venture Capital Investments in Innovative Startups as a Real Option

How Incumbent Firms Cope with Economic Policy Uncertainty: The Case of Corporate Venture Capital Investments in Innovative Startups as a Real Option

CEO duality and tenure, and the adoption of goal ambidexterity in corporate venture capital

In a study of corporate venture capital investments by 81 corporations during a two-year period, we explore the factors leading to goal ambidexterity, or a balanced pursuit of strategically- and financially-oriented deals, by incumbents. Our results indicate that CEO characteristics play an important role in the adoption of goal ambidexterity by corporate investors. Specifically, CEO duality positively affects the adoption of goal ambidexterity, whereas CEO tenure exerts a negative influence on the likelihood of such adoption.

The effect of green startup investments on incumbents’ green innovation output

Green innovation is essential to green transformation. Incumbents possess the resources to exploit these green innovations and establish them on the market, while startups typically explore the underlying technology in the first place. Drawing on the notion of absorptive capacity, it is argued that corporate venture capital (CVC) allows incumbents to tap into valuable external knowledge of green startups, thus being a fruitful vehicle to increase their internal green innovation output. To empirically test the model, a panel dataset of 1,568 firm-year observations of U.S. firms from 2000 to 2018 is used. The authors find empirical support that CVC investments in green startups are associated with increased green patent applications of the parent firm, thus allowing researchers and practitioners better to assess startups’ sustainability impact across firm boundaries. The study contributes to the green entrepreneurship literature by enriching the understanding of the distinct roles of incumbents and startups and their joint interplay in the green transformation of markets.

The impact of platform corporate venture capital vs. traditional corporate venture capital on internet initial public offering underpricing: Evidence from Chinese-listed internet firms

PurposePlatform firms are playing an increasingly major role in venture investment. Based on the motivation perspective and signaling theory, this paper examines the effects of platform corporate venture capital (CVC) versus traditional CVC on Internet IPO underpricing.Design/methodology/approachThe sample consists of 117 Chinese Internet firms that went public between 2004 and 2019. Two-stage Heckman regression analysis was used to test several hypotheses.FindingsThis paper finds that, compared to traditional CVC firms, platform CVC firms increase Internet IPO underpricing. In particular, with the contingency of strong prior performance or implementation of China’s “Internet plus” policy, platform CVC firms increase Internet IPO underpricing more than traditional CVC firms. With increasing Internet penetration, platform CVC firms will increase Internet IPO underpricing less than traditional CVC firms.Practical implicationsAs CVC firms differ in their key resources and motivations used to realize their strategic goals, IPO firms should formulate their resource acquisition strategies according to their resource needs and the contexts in which they operate.Originality/valueBy identifying the differences between platform CVC and traditional CVC, this paper complements previous research on the role of CVC backing of IPOs and extends the knowledge of CVC investment by shedding light on the contingency value of corporate investors and Internet IPO underpricing in emerging markets.

Corporate venture capital and interfirm rivalry: A competitive dynamics perspective

AbstractResearch SummaryThis study views corporate venture capital (CVC) investment as a form of inter‐firm rivalry. Adopting a competitive dynamics perspective, we argue that when a focal corporate investor invests in an entrepreneurial venture, that investment sends important competitive signals to its rivals, thereby increasing their likelihood of initiating a matching response. We theorize how three factors characterizing such investment—the amount of funding, industry relatedness between the corporate investor and the entrepreneurial venture, and the reputation of the corporate investor—can influence rivals' awareness of competitive threat, their motivation to respond, and therefore their likelihood of launching a matching counterattack. Our results demonstrate substantial support for our theoretical model.Managerial SummaryThis study views CVC investment as a form of competitive interaction, arguing that when a corporate investor participates in an investment round, it sends a competitive signal to its rival, motivating the latter to respond by also investing in CVC. Because of this counteraction, the competitive advantages of firms' CVC strategies may be temporary as rivals catch up and nullify the benefits of a CVC initiative. Thus, when planning strategy, CVC managers need to take potential rival counteractions into account and carefully assess the competitive implications of their CVC strategy, perhaps by avoiding harmful counteractions through initiatives more subtle in execution and orientation, and thus “under the radar” of rivals.

Corporate Venture Capital and Sustainability

Corporate Venture Capital (CVC) has been receiving increasingly more attention all over the world as a special way for accessing new ideas and innovative opportunities through minor-share investing in established companies. The purpose of CVC investments may either be purely financial or to pursue strategic goals. Organisations often seek to take actions that impact positively on sustainability by assembling related knowledge and technologies. These resources may come from invested startups through the use of a CVC programme. This research aims to measure and analyse the Corporate Venture Capital programmes of companies listed in the ISE B3 Corporate Sustainability Index. To this end, a three-step methodology was conducted. First, a systematic review of the literature took place, followed by a review of companies based on secondary sources such as their websites. Finally, a survey was developed and was opted to survey companies through their Investor Relationship (IR) public channels. Results show that 27 of the companies listed in the ISE B3 Index have CVC programmes that contemplate organizational initiatives besides investment. In this sense, one can claim that at least 70% of the ISE B3 Index companies are somehow involved in CVC operations. The results contribute to the literature on corporate venture capital and sustainability by showing that companies spend from 10% to 15% of their capital in sustainable businesses in order to remain competitive.

How Does Policy Uncertainty Affect Corporate Venture Capital Investments?

Firms’ use of corporate venture capital (CVC) investments has become one the most prominent ways in which firms strategically adapt to the changing environment, and understanding the associated drivers is important for both theory and practice. In this study, we examine how policy uncertainty affects CVC investment. We argue that policy uncertainty is positively related to the amount of resources committed to CVC investment. However, we also argue that firms that are more dependent on government spending and firms with higher R&D intensity attenuate the positive relationship between policy uncertainty and CVC investment. Using data on CVC investments made by U.S. publicly traded firms from 1997 to 2020, we find empirical results supporting our theoretical arguments. Our study has important implications for entrepreneurship and innovation.

Is Your Knowledge Still Valuable? CVC Knowledge Obsolescence and Portfolio Firm Innovation

We examine the impact of a corporate venture capital (CVC) investor’s knowledge obsolescence on their portfolio firms’ innovation performance. We propose that a CVC investor’s knowledge obsolescence, defined as the degree of decline in the value or usefulness of a firm’s knowledge base, has a negative impact on their portfolio firms’ innovation performance as knowledge obsolescence increases the incentive of CVC investors to focus efforts on their own innovation rather than those of the portfolio firms. We also suggest that this effect would be weakened by the prior litigation experience of the CVC investor and the network prominence of the independent venture capital (IVC) that co-invests with the CVC investor. Using a sample of U.S. semiconductor ventures that received a CVC investment in 2006-2015, we find support for all of our predictions. Through this study, we bring in a temporal perspective on knowledge value and provide its implications on CVC investments and portfolio firms’ innovation performance.

Whose Money Should I Take? Investments in Renewable Energy Ventures by Oil and Gas Incumbents

I study the conditions under which new ventures are more likely to receive corporate venture capital (CVC) investments from incumbents that operate in substitutive business domains and thus pose extremely high competitive and reputational risks. Using a sample of CVC investments in the energy industry in 2001-2019, I find that on average, renewable energy ventures are less willing to receive investment from O&G incumbents when the incumbent has a stronger commitment to its current businesses in O&G and faces more shareholder concerns on environmental issues. However, renewable energy ventures are more likely to receive investment from O&G incumbents that are located in institutional environments with higher standards towards environmental issues. Through this study, I aim to bring in the perspective of new ventures into CVC investment relationships and explore how they take their own precautionary measures against the anticipated risks.

Corporate Venture Capital Investment Strategy: The Unorthodox Approach of Family-Controlled Firms

Drawing on socioemotional wealth and agency theories, we develop hypotheses suggesting that large family-controlled firms (FCFs) are less prone to invest in corporate venture capital (CVC) than non-FCFs counterparts and, when they do, FCFs follow an unorthodox investment strategy. We argue that CVC investments threaten the family’s socioemotional endowments, leading those FCFs that participate in CVC programs to make fewer but larger CVC investments to (1) enhance family control over the start-ups and (2) focus on less risky start-ups at later stages of their development. We also posit that the board composition in terms of independent directors plays a moderating role. We test our hypotheses using a sample of 256 firms listed on the U.S. stock market that come from three technologically intensive sectors. We collected detailed information about the CVC investments these corporations made between 2007 and 2018 and then combined it with ownership structure and corporate governance data. The empirical results are consistent with most of our hypotheses.

Corporate Venture Capital Investment Practices and the Exit Puzzle

This study analyzes the effect of corporate venture capital (CVC) investment practices on the subsequent exit outcomes of portfolio companies. Specifically, we draw upon institutional theory to examine the role of CVC investment relatedness, commitment, timing, and syndication for exiting portfolio companies through subsequent acquisitions vis-á-vis IPOs. Studying 1,093 CVC investor-investee dyads followed by a portfolio exit between 2010 and 2019, we provide empirical evidence that CVC investors are more likely to acquire their portfolio companies if they follow endo-isomorphic investment practices, while exo-isomorphic practices increase the likelihood of an exit via IPO. Our study contributes towards a better understanding of CVC units as ‘hybrid’ investors and can help both CVC units and entrepreneurial ventures to anticipate exit outcomes that result from specific investment practices.

Let’s Get Personal: How CEO Personality Effects Organizational Innovation via Corporate Venturing

We develop theory to explain the relationship between CEO personality and inter- and intraorganizational learning mechanisms with a focus on corporate venture capital (CVC). We provide an integrated perspective and consider CVC investments as individual innovation practice and relative to research and development (R&D) efforts. Using a novel linguistic tool to measure the personality traits of 1,360 CEOs of S&P 500 firms, we find that CEO consciousness and CEO neuroticism are negatively, and CEO openness positively associated with CVC engagement. Regarding the trade-off decision between inter- and intraorganizational learning mechanisms, we find that CEO consciousness and CEO openness each have a positive effect on CVC relative to R&D. Our results extend upper echelons research by not only highlighting the importance of CEO personality in driving organizational innovation, but also indicating how CEO personality either enhances or inhibits interorganizational learning in both absolute and relative terms.

How Do Corporate Venture Capitalists Evaluate Digital Technology Ventures? A Conjoint Analysis

Drawing upon affordance theory, this study analyzes how corporate venture capital (CVC) investment managers evaluate digital technology ventures for investment. We argue that affordances, namely action potentials that arise from the relation between CVC investors and digital technology ventures, determine investment decision-making. Our study uses experimental data from a conjoint analysis of 432 investment decisions made by 54 CVC investment managers representing 44 CVC units from 34 industries. We find that CVC investment managers value characteristics of digital technology ventures that give rise to digital affordances as well as task-sharing affordances. Our findings show that CVC investment managers’ prior digital technology experience, entrepreneurial experience, and perceived CVC unit dependence on business units influence the interpretation of affordances, and thus the evaluation of investment opportunities. Our study contributes to the understanding of CVC investment decisions and extends affordance theory by a decision-making perspective.

How Organizational Structure Shapes Explorative Innovation in CVC Investment-Relationships

Engaging in exploration is an important source of competitive advantage for established firms. However, exploration is challenging, as it requires the utilization of knowledge outside of firm boundaries. To address this challenge, firms increasingly engage in corporate venture capital (CVC) investments, which allow for assimilation of knowledge held by young ventures. Existing findings on the relationship between CVC and firm exploration remain inconclusive, calling for the investigation of contingency factors. We address this gap by drawing from the knowledge-based view and empirically examining the effect of the organizational structure of CVC units. Further, we consider the interplay of CVCs organizational structure and firms’ diffusion and recombination capabilities for exploration performance. In doing so, the study contributes to our understanding of CVC as external knowledge sourcing mechanism, highlights limitations to this approach, and offers practical insights for corporate investors.

Can Firms be More Innovative by Investing in Uncertain Portfolios?

In this study, I examine the relationship between early stage Corporate Venture Capital(CVC) investments and the innovation. Although investing in early stage ventures is considered to be more uncertain, there may be potential knowledge-based advantages that can be captured. Drawing from the organizational learning perspective, I propose that increasing early stage CVC investment enhances the innovativeness of these firms. I also posit that the knowledge of investees in the early stage can be relatively more accessible for investing firms as it is mostly intangible and not yet embodied in products. I analyze a panel of 91 U.S. high-tech firms in the 1993-2018 period and find empirical evidence suggesting a positive association between early stage investment and firm innovation, in the short-term. However, greater industry diversity of a firm’s CVC portfolio attenuates this relationship. Contrary to my prediction, it was found that greater investment experience in early stage is not sufficient to develop absorptive capacity in exploiting knowledge from other investment in early stage ventures. This paper contributes to literatures in CVC, organizational learning and firm innovation.

What Role do Founder Experience, IP, and CVC Play in Creating Unicorn Ventures? A Process Model

Research suggests that the access to resources, experience of founders, and new ventures’ innovation contribute to the entrepreneurship success. However, it is somewhat unclear how some startups go above and beyond being regular startups and receive unicorn status, i.e., at least one-billion-dollar valuation. In this study, we examine how founders’ prior entrepreneurial experience, venture’s intellectual property (IP), and access to corporate venture capital (CVC) influence a startup’s likelihood of becoming a unicorn venture. We uncover that IP partially mediates the relationship between the founders’ prior entrepreneurial experience and the likelihood of becoming a unicorn venture and that the presence of CVC investors negatively moderates the effect of founders’ prior entrepreneurial experience on the venture’s IP. Surprisingly, we find that that the presence of CVC does not moderate the relationship between founders’ prior entrepreneurial experience and the likelihood of becoming a unicorn venture.

The impact of dynamic ambidexterity on the performance of organizations: Evidence from corporate venture capital investing in North America

The purpose of this paper is to study the evolution of corporate investors’ exploitation-exploration allocations and their long-term performance outcomes. The sample consists of 243 North American firms pursuing corporate venture capital (CVC) investments from 1993 to 2017. The results show that dynamic sequential ambidexterity promotes higher firm performance than balanced or simultaneous forms of ambidexterity. Alternating pursuit of exploitation and exploration characterized by a regular frequency of change over time enhances corporate investors’ financial performance. The results suggest that CVC firms develop additional expertise in pursuing both exploitation and exploration activities over time which helps to enhance their performance. The findings also show that in times of crisis, the combined use of both exploration and exploitation in CVC investments enables firms to enhance their financial performance. The results are robust to alternative measures of financial performance and to endogeneity concerns. This paper provides insights to policymakers and managers of firms that are investing in CVC activities.

The performance effects of corporate venture capital: a meta-analysis

The effect of corporate venture capital (CVC) investments is far from being conclusively discussed in literature. Although the expected benefits of CVCs for corporations and start-ups are undisputed, empirical evidence is mixed. We combine and analyze the results of 32 CVC studies, including 105,950 observations: Our results suggest that while CVC investments are positively linked to start-ups’ and investors’ as well as strategic performance, we find no significant relationship between CVC investments and financial outcomes. The effects are moderated by the timing of the investment, the country and industry-effects. For instance, CVC investments in North America and the ICT sector report significant positive effects, while we find no statistical evidence for the health care sector.