Corporate Venture Capital Investments Research Articles

The Effect of Corporate Venture Capital on Labor Income Share: Evidence from China

This study examines the impact of corporate venture capital (CVC) on the labor income share of science and innovation enterprises, focusing on data from China’s Science and Technology Innovation Board (STIB) and Growth Enterprise Market (GEM) between 2010 and 2022. Empirical results reveal a significant inverted U-shaped relationship between CVC shareholding and the labor income share of invested firms. CVC increases the labor income share by enhancing corporate governance, encouraging digital transformation, and improving human capital quality, but this effect diminishes when CVC shareholding exceeds a certain threshold. The moderating role of media attention and the heterogeneity of this relationship across regions and financial conditions are further explored. Additionally, the study identifies a positive U-shaped connection between CVC shareholding and the corporate pay gap, highlighting CVC’s complex role in influencing income inequality within firms. This research contributes to the literature by unveiling the nonlinear effects of CVC on income distribution, offering new insights into its dual role in promoting innovation and equity. Practically, it provides actionable recommendations for firms to optimize CVC ownership and for policymakers to design targeted interventions that address regional and financial disparities. By bridging the gap between CVC investment strategies and labor income fairness, this study lays the foundation for a balanced approach to sustainable economic development.

Research on the Reverse Technology Spillover Effect from China’s CVC Overseas Investments

China’s corporate venture capital (CVC) overseas investment began in the late 20th century and has expanded significantly over the years. By 2021, more than 265 Chinese institutions and companies had engaged in cross-border investments, contributing over USD 100 billion. These investments present a unique opportunity to examine the reverse technology spillover effect on China’s technological development. Using a Difference-in-Differences model and regression analysis, we investigate whether China’s CVC overseas investments drive technological progress. Our findings reveal three key insights: (1) these investments have a positive impact on China’s technological advancement, (2) the effect is stronger when the host country has a higher level of technology, and (3) larger investment amounts amplify the impact. This research not only highlights the transformative potential of cross-border CVC investments but also demonstrates how enterprises can leverage reverse innovation spillovers to accelerate China’s technological progress. Additionally, we introduce a novel approach to studying this phenomenon, contributing to the existing scholarship on global innovation dynamics.

Corporate venture capital unit governance and firm values

ABSTRACT This study analyses which Corporate Venture Capital (CVC) unit governance features are statistically associated with the realization of higher firm values for corporate backers. It focuses on the long-term effect of CVC activities with a comprehensive European sample comprising more than a decade (2010–2020) of CVC investments. The results indicate that the more active CVC units are linked to parent companies with higher Tobin’s Q. A larger share of women in investment teams as well as sector focus amplify this finding. Our results are robust across various model specifications. They confirm the importance of CVC governance for unlocking the full potential of CVC investment programs when considering the most recent decade with considerable economic turbulence. Our findings on the value-enhancing role of sector concentration and female investment professionals add to the resource-based theory and social capital theory, respectively.

Corporate venture capital (CVC) investments and digital transformation: analysis of moderating effects based on industry level

ABSTRACT Although numerous studies have focused on the advantages and necessity of digital transformation, the discussion on how to drive digital transformation in firms appears even more crucial and essential. Following the resource-based view (RBV), this study examines the relationship between CVC investments and digital transformation. The results demonstrate that CVC plays a pivotal role in facilitating the digital transformation of incumbent firms, even after a series of robustness tests. Moreover, the moderating effects reveal that industry competition intensity and industry technological change negatively affect the relationship, while industry growth positively affects the relationship. CVC investments have a significantly positive influence on TDT (Technology-based digital transformation) and do not affect MDT (Market-based digital transformation). These findings expand our understanding of effectively facilitating the digital transformation of incumbent firms and provide theoretical and practical implications.

Startup Accelerators, Information Asymmetry, and Corporate Venture Capital Investments

Beyond financial incentives, investments by Corporate Venture Capitalists (CVCs) are often motivated by strategic objectives, such as gaining early exposure to emerging technologies. However, in the presence of information asymmetry, CVCs tend to invest in startups with a high degree of business relatedness—startups that are less risky but lacking in knowledge novelty—which are not ideal for achieving their strategic objectives. With startup accelerators showing promise in mitigating the information asymmetry problem, we examine how a CVC’s investment pattern in a region shifts following a startup accelerator’s entry, with a particular interest in the degree of business relatedness between the CVC’s parent corporation and its portfolio companies. Analyses reveal that CVCs increase investments in startups that are dissimilar to their parent’s business following the entry of startup accelerators. We show that the two pathways through which accelerators reduce information asymmetry—quality signals, and mentorship and training—likely contribute to this change. In addition, the change is most pronounced for CVCs whose parent firm operates in an IT-using—rather than an IT-producing—industry, suggesting that accelerators help IT-using firms gain a foothold in the technology space through CVC investments. These findings deepen the understanding of the role that startup accelerators play in the entrepreneurial ecosystem against the backdrop of digital transformation occurring in nearly every industry. This paper was accepted by Kartik Hosanagar, information systems. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2020.03494 .

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

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.

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

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.

Matchmakers or chaperones? How venture capital investors facilitate startups’ corporate venture capital partnership formation through aligning and disciplining

Matchmakers or chaperones? How venture capital investors facilitate startups’ corporate venture capital partnership formation through aligning and disciplining

Compensation incentives, geographical distance, and the successful exit of indirect CVCs

PurposeThe literature suggests that increasing the intensity of compensation incentives for corporate venture capital (CVC) managers can contribute to successful exits of direct CVCs. This study explores the impact of compensation incentives on the successful exits of indirect CVCs under different geographical distances between parent companies and indirect CVC managers.Design/methodology/approachThe authors observed the compensation terms of CVC managers through investment announcements made by listed companies and used a probit regression model to test the hypotheses from a sample of 241 investment events with indirect CVCs in China.FindingsThe results show that if parent companies are geographically close to the managers of indirect CVCs, increasing the intensity of compensation incentives for managers will help the successful exit of indirect CVCs. However, if parent companies are not geographically close to indirect CVC managers, increasing the intensity of compensation incentives for managers will not promote the successful exit of indirect CVCs.Originality/valueThis study contributes significantly to the CVC literature. First, it sharpens our understanding of the differences in operational mechanisms between direct and indirect CVCs. Second, we find that the threshold returns of indirect CVC managers are non-negligible compensation incentives. Finally, the empirical evidence supports that in indirect CVC investments, the geographical distance between parent companies and managers is concerning because it affects whether compensation incentives contribute to the successful exit of indirect CVCs.

When Do Corporate Venture Capital Investments Drive Product and Business Model Innovations?

When Do Corporate Venture Capital Investments Drive Product and Business Model Innovations?

Where to invest? Effects of technological capabilities on corporate venture capital investments

Abstract Research SummaryWe investigate why a corporate investor makes more corporate venture capital (CVC) investments in certain areas than in others. Focusing on firms' different technological capabilities across distinct technology domains, we argue that a corporate investor's technological capabilities in a given domain affect its likelihood of investing in (1) ventures within the domain in an inverted U‐shaped manner and (2) ventures operating in other technologically complementary domains in a positive manner. We further claim that these two suggested relationships between technological capabilities and the likelihood of CVC investments are shaped by the technology growth rate of the focal domain. We test these arguments in the US medical sector, where incumbent firms are active in CVC investments as a means to acquire external knowledge.Managerial SummaryWe argue that firms exhibit different patterns in their choice of CVC investment areas based on their technological capabilities within a given technology domain. Our findings in the US medical sector indicate that firms are most likely to invest in ventures within domains where their technological capabilities are moderate—neither too weak nor too strong. This suggests that CVC investments serve gap‐filling purposes for technology intermediates. Moreover, corporate investors tend to invest in ventures within domains that are technologically complementary to their areas of strength. However, when a given domain experiences rapid growth, technology leaders in that domain shift their CVC investment focus from complementary areas to that domain to maintain their leading position.

The value of a reputation for sustaining commitment in interfirm relationships: The inclusion of corporate venture capitalists in investment syndicates

The value of a reputation for sustaining commitment in interfirm relationships: The inclusion of corporate venture capitalists in investment syndicates

The Benefits of Cross-Border Corporate Venture Capital Investment on the Likelihood of a Venture Firm’’s IPO

Purpose - Extant research indicates that CVC investments create value for venture firms and generally enhance the likelihood of a successful venture exit. In particular, despite the globalization of CVC investments, the impact on venture firm exit performance has been largely overlooked. Thus, this study explores the impact of cross-border CVC investments on the likelihood of a venture firm’s IPO. We argue that the foreignness of CVCs increases the likelihood of IPO, but this positive relationship is weakened when CVC units have a tight structure.
 Design/Methodology/Approach - The hypotheses are tested with 1,874 high-technology venture firms in the U.S. that received CVC investments between 1994 and 2009. A two-stage analysis was employed to address potential selection bias. In the first stage, we employed a probit model to predict the probability of receiving cross-border CVC investment. In the second stage, we conducted a probit regression analysis on the likelihood of IPO, incorporating the inverse Mills ratio to address selection bias.
 Findings - We found that the foreignness of CVCs increases the likelihood of a venture firm’s IPO. However, this positive impact is weakened when CVCs have a tight governance structure.
 Research Implications - This study highlights the benefits of cross-border CVC investments and enriches resource dependence theory by reconciling it with institutional theory, depicting the importance of both reducing resource constraints to create value for venture firms and the institutional logic pursued by CVCs. This study suggests that entrepreneurs should be careful with CVC units that prioritize strategic objectives.

The inside track: Entrepreneurs' corporate experience and startups' access to incumbent partners' resources

Abstract Research SummaryStartups are increasingly turning to incumbent firms for venture capital, anticipating access to the investor's knowledge and complementary assets. However, startups' eventual access to these resources varies widely. This article highlights one important driver of such variance, whether startups' managers were previously employed by an incumbent in the same industry. Using data from the life sciences, I find that such corporate experience can precipitate technical knowledge flows to startups by enabling the generation of relational capital with incumbent firm managers. It also helps startups navigate incumbents' decision‐processes to formalize access to downstream complementary assets via alliances. The former effect is stronger when corporate experience is technology‐focused, the latter when it is commercialization‐focused. Corporate experience at the investing incumbent firm amplifies informal knowledge‐flows but not formal alliances.Managerial SummaryStartups typically expect corporate venture capital investors to facilitate access to resources these investors' parent companies control. However, such resource‐access often does not materialize, with startups struggling to navigate the large, complex organizations within which these resources are located. I identify an important driver of variance in such resource‐access. Prior experience working in an established company in the same industry enhances startup leaders' ability to informally tap into corporate investors' technical knowledge, and to formalize alliances to access corporate investors' go‐to‐market assets. Technology‐focused experience is especially helpful with the former, and commercialization‐focused experience with the latter. Such access is more likely to enable exit for the startup if the established firm has direct experience in the specific product markets the startup is focusing on.

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

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

Does directors’ educational background influence financing innovation through corporate venture capital investments? Evidence from France

Does directors’ educational background influence financing innovation through corporate venture capital investments? Evidence from France

Corporate Venture Capital and Firm Scope

Abstract This study examines whether and how corporate venture capital (CVC) spurs changes in firm scope. Using two text-based measures of firm scope, I provide evidence that CVC investments are strongly correlated with subsequent changes in firm scope among CVC parent firms, including seeding emerging businesses and creating new segments or divisions. Further evidence is consistent with an experimentation view, with more promising ventures having a stronger strategic impact on the scope changes of parent firms. Moreover, the study finds that post-CVC scope changes are primarily built internally and rarely involve killer acquisitions. These changes create value for CVC parents.

The Effect of Categorization Breadth and Granularity on Corporate Venture Capital Investment

The Effect of Categorization Breadth and Granularity on Corporate Venture Capital Investment

DEVELOPMENT OF CORPORATE VENTURE CAPITAL UNDER THE CONDITIONS OF INTENSIFICATION OF INNOVATIVE ACTIVITY

In recent years, corporate venture capital has gained popularity in all areas of the economy in different countries of the world. Along with traditional venture capital funds, business angels and accelerators, traditional corporations also invest in startups around the world. Most often, these processes take place according to the corporate venture capital model. This makes it possible to remove restrictions on the participation in corporate venture funds mainly of legal entities, will open up opportunities for the participation of various subjects in corporate venture funds, and promotes the investment of funds in innovative structures. The purpose of the article is to analyze corporate venture capital, to identify structural characteristics of corporate venture capital and peculiarities of corporate venture investing in Ukraine. During the research, the method of synthesis and analysis, induction (in the study of corporate venture capital, structural characteristics of corporate venture capital and peculiarities of corporate venture investing in Ukraine); the method of schematic, graphic images (for the visual display the received results of the study) has been used. The main structural characteristics of corporate venture capital have been singled out. The signs of structural characteristics of corporate venture capital include the parameters of the corporate venture capital investment model, the types of corporate venture investment goals, criteria for deciding on financing a startup for investors and analysts of corporate investment funds, the types of corporate venture capital investments, the main motives for investment by corporate venture capital funds, ways to promote business growth through corporate investment in venture capital funds, the main financial parameters of the sustainability of corporate venture capital. Ukrainian investors appeared in this field literally 5-7 years ago, but their interest in global international startups is already marked. It was established that for Ukrainian businessmen venture investments at the stages of the B+ series are a new stage of expansion of the investment portfolio. The amount of investment depends on the investor's faith in the project and the arrogance and talent of the startup. If «seed» and «angel» investments are calculated on average in hundreds of thousands of dollars, then capital investments in the innovative business are measured in millions and tens of millions. The main goal of corporate venture capital is strategic innovative business development. Activation of activity through corporate venture capital investments in Ukraine is only developing, and much depends on the business reputation and personal characteristics of managers. Ukraine's economy needs integration into global economic processes through the development of corporate venture capital.

The Impact of Corporate Venture Capital on Enterprise Value in China

Purpose – Chinese corporate venture capital has been particularly active in the Internet sector, with Tencent gradually expanding its business ecosystem through corporate venture capital activities. Therefore, this paper chooses Tencent as the case study object to discuss the influence of venture capital on the value creation of the platform-type business ecosystem, hoping to provide reference for China’s corporate venture capital practices. Design/Methodology/Approach – This paper takes Tencent’s corporate venture capital investment data from 2011 to 2022 as the research object, and uses case analysis, financial index analysis, and event analysis to demonstrate whether there is influence between corporate venture capital and enterprise value. Findings – Through the analysis of the investment motivation, investment mode, and investment projects of Tencent Group’s venture capital, the research results show that corporate venture capital can indeed have an impact on the strategic and financial values of enterprises. Research Implications – There are few studies on the venture capital activities of Internet platform enterprises in the existing literature. Based on two dimensions of strategic and financial value, this paper explores the value creation function of venture capital in the platform business ecosystem, and the research results have reference significance for the venture capital activities of other enterprises.