Corporate Venture Capital Programs Research Articles

Venture capital investing by information technology companies: Did it pay?

While corporate venture capital programs offer prospects for direct financial returns and strategic benefits, there is little evidence regarding whether they deliver economically significant value to sponsoring firms. We take an initial step in addressing this question by evaluating direct returns of programs of U.S. information technology companies during 1990–2002. Direct gains (losses) were widely dispersed and bimodally distributed, based on IRR and net cash flow metrics. Timing of initiation within the venture capital cycle; program scale; and annual investment, write-down, and harvest behavior were associated with differences in returns. We also explore how program characteristics may relate to their attractiveness as platforms from which to pursue strategic benefits.

When do incumbents learn from entrepreneurial ventures?: Corporate venture capital and investing firm innovation rates

In this paper, we focus on the potential innovative benefits to corporate venture capital (CVC), i.e. equity investments in entrepreneurial ventures by incumbent firms. We propose that corporate venture capital programs may be instrumental in harvesting innovations from entrepreneurial ventures and thus an important part of a firm's overall innovation strategy. We hypothesize that these programs are especially effective in weak intellectual property (IP) regimes and when the firm has sufficient absorptive capacity. We analyze a large panel of public firms over a 20-year period and find that increases in corporate venture capital investments are associated with subsequent increases in firm patenting.

Strategic Value of Corporate Venture Capital Programs

Corporate venturing activities, driven largely by the need to be competitive in the Internet Age, have out-paced the accompanying theory on how such programs can create value. This article presents a framework for understanding value creation through a firm9s venture capital programs. The framework includes two stages of value creation: a firm creates value through building technology equity and brand equity, and then corporate venturing programs can multiply this value. A mediating variable, free cash flow level, is included to allow for effective use of venture funds.