Corporate Venture Capital Research Articles

Study on Value Symbiosis and Niche Evolution of the Corporate Venture Capital Ecological Community for Innovation and Knowledge

Within the context that global scientific and technological innovation continues to break through discipline constraints and achieve cross-domain group breakthrough development, large enterprises are constantly seeking new ways of opening and enabling. Corporate venture capital (CVC) has become an important way for large enterprises to seize knowledge, achieve symbiotic innovation, and explore external resources. By employing the bionics research method and focusing on the symbiosis mechanism between large enterprises and start-ups, this paper conducts an in-depth analysis on the symbiosis motivation, the composition of the symbiosis system, and the symbiosis environment, and explores the evolutionary simulation after the increase or decrease of resource capacity, the intrusion of the innovation population, or the equipotential integration into the innovation ecosystem when the external environmental factors change to verify the coordinated development within the enterprise population and between the enterprise population and the environment. The results show that: (1) The symbiosis, self-consistency, evolution, spillover, and other effects within the CVC ecological community fully realize the “positive sum game” process of both sides; (2) The large enterprise population and entrepreneurial enterprise population in the CVC ecological community form a two-dimensional symbiotic system; and (3) When the resource capacity of the innovation ecosystem changes, the innovation population invades the system with a strong jump in the queue, and the innovation population participates in the system with a weak allelic fusion. This paper points out the influence, interaction, and evolution development laws between enterprise species, enterprise groups, and the innovation system environment and enriches and expands the theory of the relationship between venture capital and enterprise innovation.

The effects of environmental performance and green innovation on corporate venture capital

The aim of this study is to provide investors, policymakers and others with information on how greenhouse gas (GHG) emissions and green innovation affect corporate financial performance. Although reporting by corporate venture capital (CVC) firms on GHG emissions as well as their green innovation has increased significantly, especially in the last two decades, little is known about how these two factors affect financial performance. To fill this gap, this article investigates the relationships between environmental performance, green innovation, and financial performance in CVC investments in the US over an 18-year period between 2002 and 2019. The results show the effects of GHG-emission reduction and green innovation, both separately and combined, on the financial performance of CVC firms. These findings contribute to the ongoing debate on the role of corporations in the efforts to reach net-zero emissions. The results indicate that emission reductions give firms a financial advantage over time and that there is a financial interest for corporate investors to drive green innovation. These results have important implications for research and practice and illustrate the importance for corporate investors of including ecological considerations in their overall business strategies to create competitive advantage.

Entrepreneurs' preference for corporate venture capital – The influence of exit strategies and resource requirements

PurposeLiterature on entrepreneurial finance has long overcome the view of an investor as a sole provider of financial capital. Entrepreneurs need to consider more aspects when deciding on an investor. Especially the depiction of corporate venture capital (CVC) investors has long highlighted advantages and disadvantages compared to independent VC (IVC) investors. The authors investigate what drives entrepreneurs' preferences for CVC relative to IVC and thereby focus on two key issues in the entrepreneur's consideration – the role of resource requirements and exit strategies.Design/methodology/approachThe data were collected in an online survey that gathered information on several characteristics of entrepreneurs and their ventures. The resulting data set of 105 German entrepreneurs was analyzed using logistic regression and revealed important drivers for entrepreneurs' investor preferences.FindingsThe study’s findings confirm that the venture's resource needs, specifically the need for marketing resources and access to the corporate network, which play a significant role in the decision on whether a CVC or IVC investor is preferred. Moreover, the analysis debunks the hypothesis that entrepreneurs view a CVC investment as the first step toward acquisition. However, those entrepreneurs striving for an IPO are less likely to prefer CVC.Originality/valueThe study expands the literature on CVC attractiveness and specifically considers the entrepreneurs' intentions and needs. The results confirm but also debunk some widespread perceptions about why entrepreneurs choose to pursue financing from a CVC investor.

The impact of independent and heterogeneous corporate venture capital on firm efficiency

While corporate venture capital funds (CVCs) are commonly analyzed as homogenous units, they display significant heterogeneity across various organizational aspects, which affect them and subsequently their portfolio firms. Using a sample of 383 European portfolio firms from the longitudinal VICO dataset, we first investigate the impact of investor type (independent vs corporate) on firm operating efficiency. We show that firms backed by CVCs suffer reductions in productivity. We then account for CVC heterogeneity and find that these significant reductions in operating efficiency only occur for ventures backed by endoisomorphistic CVCs, which resemble more corporate structures. By contrast, firms backed by exoisomorphistic CVCs, which resemble more independent venture capital structures, do not show significant differences in productivity compared to ventures that receive independent venture capital backing.

The ownership structure of corporate venture capital financing and innovation

Previous empirical findings on the impact of corporate venture capital (CVC) investment on invested entrepreneurial companies' technological innovation are rather mixed. In this paper, I explore a key determinant of this relationship-the ownership structure of CVC firms. It is likely that the ownership structure of CVC firms also affects their ability to select portfolio companies. To address the selection bias of CVC firms, I use propensity score matching to compare private and public CVC-backed entrepreneurial companies. The results show that entrepreneurial companies that are backed by private CVC firms are more innovative than those that are backed by public CVC firms. In addition, I also explore the underlying mechanism and find that private CVC investors are more failure tolerant compared with public CVC investors and this leads to the superior ability in stimulating innovation performance.

The role of corporate venture capitalists in supporting the growth of their backed start-ups

PurposeBuilding on the venture capital (VC) literature, this paper aims to study the impact of the value added by corporate venture capitalists (CVCs) on their funded companies by comparing its IPO valuation with its independent venture capitalists (IVCs) peers.Design/methodology/approachThis study uses a sample of 3,719 VC-backed ventures, between the years 1998 and 2020. The empirical analysis focuses on the propensity score matching approach, pairing ventures based on their probability of being funded by CVCs, and consequently, interpret the results derived from the valuation multiple ratios between the “nearest neighbors.”FindingsThis study finds that companies funded by CVCs can achieve higher valuations at their IPO compared to IVC-backed companies. Moreover, CVC-backed companies outperformance is mainly driven by startups which hold a technological fit with their CVC investor, with higher technological overlaps being translated into more significant valuations.Research limitations/implicationsThis study presents systematic evidence to the subject concerning ventures’ type of investors and its effect on the startups’ IPO valuations.Practical implicationsThis paper contributes to the enrichment of the industry’s literacy while also easing entrepreneurs’ decisions when choosing a funding partner. CVCs offer a variety of services and support that fits the specific needs of their funded companies.Originality/valueTo the best of the authors’ knowledge, this study is among the first to examine the role of CVCs as a tool to help venture growth.

Corporate Venture Capital and Startup Outcomes: The Roles of Investment Timing and Multiple Corporate Investors

ABSTRACT The effects of corporate venture capital (CVC) investments on ventures’ revenues and innovation-related outcomes depend on the characteristics of the investors and on the dynamics of the investment process. Recently, venture financing literature has highlighted the importance of investment timing as a driver for investee ventures development and success. Building on the literatures on complementary assets and relative absorptive capacity, we explore how the timing of CVC investments affects ventures’ revenues and R&D intensity. Using a dataset of Norwegian ventures in knowledge-intensive industries, we find evidence for a differential effect of CVC investments when comparing a venture’s early- and late-stage, showing that investments received in late-stage increase ventures’ revenues, but decrease ventures’ R&D intensity. Further, we find that syndication with multiple CVC investors amplifies this effect. This study contributes to the understanding of the CVC-venture relationship and the impact on venture’s post-CVC outcomes.

Investment decisions under uncertainty: Corporate venture capital as a real option

AbstractThis paper aims to assess the role of corporate venture capital (CVC) as option‐creating investments and how corporate investors practice CVC options in their investment decisions. Using a sample of 4206 US firms between 1998 and 2019, our results show that sector fit and geographic fit reduce uncertainty and impact investors' decisions on CVC investments. When exogenous uncertainty is mitigated, CVC‐backed companies experience higher investment amounts than independent venture capital funds (IVC)‐backed ones. The results evidence that follow‐on investments motivate IVC‐backed companies to exit via IPOs. At the same time, a prolonged duration for the organisational learning option leads CVC‐backed companies to exit via acquisition. This study helps investors to reduce uncertainty surrounding investments and improve the usefulness of their real options. We also provide implications for how policymakers target and develop an entrepreneurial ecosystem.

Extending Open Innovation: Orchestrating Knowledge Flows from Corporate Venture Capital Investments

Although corporate venture capital (CVC) has been studied as part of open innovation (OI), assumptions about knowledge flows crossing organizational boundaries between “the inside” and “the outside” have limited those explorations. Drawing on an abductive approach to grounded theorizing, this article introduces an intuitive yet novel framework that traces the sources and applications of knowledge obtained from CVC to derive new conditions for how those investments allow companies to orchestrate knowledge flows to overcome barriers and increase their innovation effectiveness. Besides exploring traditional OI knowledge flows within the CVC context, this article further identifies and examines both outside-out knowledge flows (which help to shape an ecosystem for a corporate innovator) and inside-in knowledge flows (which overcome internal silos to achieve real innovation impact).

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.

CORPORATE VENTURE CAPITAL FOR ESTABLISHING LINKS BETWEEN LARGE AND TRADITIONAL INDUSTRIAL COMPANIES AND STARTUP FIRMS: A REGIONAL INNOVATION SYSTEM SURVEY

This research aims to evaluate the actual level of understanding and application of Corporate Venture Capital (CVC) in the Regional Innovation System (RIS) present in the Metropolitan Region of Curitiba (MRC). The survey focuses the large and traditional industrial companies (LTIC) which have tremendous importance to State of Paraná, due to taxes and formal jobs generation. While the LTIC needs to innovate, creating or recovering competitive advantage, the startup firm seeks for partnerships or private equity. In this context, there is an opportunity of establishing linkages between different actors through the CVC. The article presents the results of a survey consisting of an online questionnaire and a focal group, where the data was analyzed through a qualitative approach. The research demonstrated a minor part of the survey respondents practicing CVC, although an expressive number of companies intends to invest in startups. It was also possible to observe that the risk aversion, anxiety for financial payback and different vocabulary between startup and LTIC are still barriers to an effective adhesion to CVC in this regional context. This work contributes to scientific literature when highlight the importance of understanding and properly narrowing large companies of startups. However, the asymmetries between parts and the maturity for dealing and absorbing knowledge from startups is an issue that the RIS organizations could be involved. Submited: September 2022 Accepted: December 2022 DOI: 10.18226/23190639.v10n2.06

Beneficial, Harmful, or Both? Effects of Corporate Venture Capital and Alliance Activity on Product Recalls

Despite growing numbers of corporate venture capital (CVC) deals and alliances, their effectiveness is not guaranteed. This paper investigates the positive and negative impacts of CVC and alliance activity on product safety under different levels of market turbulence. Using a resource-based learning perspective and panel data from large U.S. firms, we find that both CVC and alliance activity have inverted U-shaped relationships with product recall likelihood. Market turbulence moderates both relationships, but differently. We discuss how learning theory complements the resource-based view to understand why no or rather bold external venturing are less harmful than small-scale “stuck-in-the-middle” initiatives.

The different effects of venture capital and the trade-off between product innovation effectiveness and efficiency

PurposeWhich venture capital is more beneficial in the product innovation of entrepreneurial ventures? The authors study the drawbacks and different effects of corporate venture capital (CVC) and independent venture capital (IVC) on the effectiveness and efficiency of product innovation in entrepreneurial ventures to answer this question.Design/methodology/approachThis study uses a panel dataset of 502 high-tech ventures and runs the Heckman model to correct potential endogeneity issues.FindingsThe authors find that CVC increases the product innovation effectiveness of entrepreneurial ventures, but decreases their efficiency. IVC reduces innovation effectiveness and enhances efficiency. However, CVC performs less positively, while IVC performs more positively in terms of innovation effectiveness and efficiency in the B2B market than in the B2C market.Practical implicationsThis study provides insights into how to leverage venture capital to develop new products effectively and efficiently.Originality/valueThis study moves beyond the current understanding of the finance-marketing interface. It delineates the two faces of venture capital and reveals the joint effects of equity stakes and market stakes between different types of venture capital and transaction markets in product innovation.

How Do State-Owned and Private-Owned CVC Differ in Nurturing Innovation in China?

We investigate how state-owned corporate venture capital differs from privately owned corporate venture capital in fostering innovation among startups. Based on the data of Chinese A-share listed companies and the startups in their portfolios that they invested in between 2009 and 2018, we find that startups backed by state-owned corporate venture capital are less innovative than startups backed by privately owned corporate venture capital. Using a two-stage least-squares analysis yields the same results. Further, we find evidence consistent with two potential mechanisms: Investors of state-owned corporate venture capital provide weaker technical support and are less tolerant of failure. These results have important implications for stakeholders, management, and policy makers who care about incentivizing young and rapidly growing companies to innovate more effectively.

How does disruptive innovation influence the funding decisions of different venture capital investors? An empirical analysis on the role of startups' communication

Entrepreneurs present their ideas in a favorable light through compelling communications that may shape the investors' impressions about the value of the startup's technology and its potential to disrupt. Assessing such communications, venture capital (VC) investors get an impression of the startup's technology and shape their willingness to commit resources to it. Since diverse kinds of VC investors pursue alternative investment objectives, they may develop different impressions of the startup's technology and accordingly make different resource commitment decisions. This paper aims to investigate the resource commitment decisions of VC investors when financing startups communicating disruptiveness by distinguishing between independent venture capitalists (IVC) and corporate venture capitalists (CVC). Analyzing data about 664 medical device and biotech startups in a 10-year period, we found that communicating disruptiveness decreases the amount of funding committed by IVC, while it has a curvilinear effect on the amount of funding provided by CVC. Our findings contribute to the literature and provide important implications for managers of startups aiming to secure funding from different VC investors.

Strategic Shareholders and IPO Disclosure: Evidence from Corporate Venture Capital

Strategic Shareholders and IPO Disclosure: Evidence from Corporate Venture Capital

The power of syndication: the innovation output of venture capital investments in the United States

This paper demonstrates the impact of the participation of corporate venture capital (CVC) funds and independent venture capital (IVC) funds in syndicated investments. We examine the dynamics of the impact of these syndications and the channels (industry fit and location fit) that improve innovation effectiveness. Based on the main sample of 5182 US. funded companies between 1998 and 2017, there is strong evidence of an existing superiority of CVC engagement in syndications (CVC/IVC) that can further boost the innovation output contribution. Additionally, the results show that industry and location fit augment the innovation output of the entrepreneurial companies.

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

Stock Market Manipulation and Corporate Venture Capital Investments

Stock Market Manipulation and Corporate Venture Capital Investments

Why is Corporate Venture Capital Activity Among U.S. Public Firms Sticky?

Why is Corporate Venture Capital Activity Among U.S. Public Firms Sticky?