External Venturing Research Articles

УДОСКОНАЛЕННЯ ОРГАНІЗАЦІЙНОГО ЗАБЕЗПЕЧЕННЯ ПРОЦЕСУ ЗАЛУЧЕННЯ ФОРМИ ВЕНЧУРНОГО БІЗНЕСУ ДЛЯ РОЗВИТКУ ПІДПРИЄМСТВА В УМОВАХ ЦИФРОВІЗАЦІЇ ЕКОНОМІКИ

The necessity for improving the existing organizational framework for engaging venture business forms is justified, aiming to facilitate the implementation of new technologies, elevate production to a higher level, and enhance the competitiveness of enterprises in both domestic and international markets. The organizational support for involving venture business forms in the development of industrial enterprises in the conditions of economic digitization is enhanced. A scheme for selecting the organizational form of venture business and funding sources is proposed, allowing the utilization of digital transformation tools to increase the effectiveness of venture business engagement. Venture business is defined as entrepreneurial activity involving the infusion of risky investments into the innovative development of a knowledge-intensive industry, prone to potential growth. The following organizational forms of venture business are identified: "independent ventures," "external ventures," and "internal ventures". Various types of organizational forms of venture business and sources of their funding are considered. The engagement of venture business forms is carried out through financing the venture using various capital sources, specifically from the company's cash fund, funds from venture investors, and funds obtained from a venture fund. Using the PATTERN method, a goal tree for each form of venture business and funding source is constructed. The cost forecast for organizing an internal venture with funding from the company's own financial resources is conducted. The author also proposed an alternative venture financing option using the company's funds, such as raising funds from a venture fund through the sale of 10–20% of the company's shares. The proposed measures will enable industrial enterprises to overcome their crisis and become competitive in both external and internal markets.

External Venture Idea Evaluation and Venture Idea Revisions? The Role of Opportunity Confidence

External Venture Idea Evaluation and Venture Idea Revisions? The Role of Opportunity Confidence

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.

Gender Bias in Entrepreneurship: The Role of the Founders’ Entrepreneurial Background

We examine the issue of entrepreneurial gender bias by focusing on the underlying mechanisms that impact the likelihood of receiving external venture capital financing. We claim that gender bias negatively affects socially attributed dimensions (such as the stigma ascribed to entrepreneurs who have previously suffered a failure), while it has no effect on objective dimensions (such as the experience gained by entrepreneurs). Our results, based on 2,088 US firms, show that female entrepreneurs are less likely to attract external funds if they have previously encountered failure. This negative effect becomes mostly nonsignificant when novel or serial successful entrepreneurs are considered.

How do bank-affiliated venture capitalists do deals? Towards a model of multiple investment logics

PurposeThis paper aims to investigate German bank-affiliated venture capitalists’ investment practices and the emergence of their investment logics. Most studies focus on the investment behaviour of independent venture capitalists and little is known about dependent venture capitalists’ investment behaviour. The present study contributes to filling this gap in entrepreneurial finance literature.Design/methodology/approachThe paper uses an exploratory qualitative research approach based on 27 semi-structured interviews with the top management of German bank-affiliated venture capitalists and industry experts to develop a conceptual model that explains the investment logics of bank-affiliated venture capitalists. A large amount of archival data has also been collected and used for the analysis.FindingsThe results indicate that bank-affiliated venture capitalists either follow an autonomous, contingent or hybrid investment logic. A bank-affiliated venture capitalist’s isomorphic focus – whether they feel isomorphic to the external venture capital environment or the internal parent bank’s environment – explains the emergence of multiple investment logics.Practical implicationsThe paper encourages banks to get a better understanding of how the venture capital industry works and what they need to do to compete again independent venture capitalists. Banks and their affiliated venture capital units can improve their deal flows by recognising that they need to get accepted as an on-par investor in the venture capital environment.Originality/valueThe current study is the first of its kind investigating multiple investment logics by focussing on the link between different isomorphic habits and the specific context of bank-affiliated venture capitalists.

Effect of HTE certification on external resource acquisition and firm performance: evidence from China

ABSTRACT This paper argues that the high-tech enterprise certification (HTE certification) can facilitate firm performance and that this effect is mediated by external resource acquisition, including venture capital and human resource in the context of China. Using the Chinese industrial enterprise database and difference–in-difference approach, our results indicate that: (a) HTE certification is positively associated with external resource acquisition, namely, venture capital and human resource; (b) both venture capital and human resource are positively related to firm performance and (c) the external resource acquisition including venture capital and human resource mediates the relationship between HTE certification and firm performance.

Buffering State-making: Geopolitics in the Sudd Marshlands of South Sudan

ABSTRACT This paper explores the history and ongoing transformation of the South Sudanese Sudd marshlands as a buffer zone in a variety of subsequent projects of domination and their subversion. Its argument will be that the contemporary geopolitics of the Sudd cannot be understood properly without unwinding the historical layers of contestation and conflict around these projects of control and their reversal, projects which have sought to shape and have been shaped crucially by the area’s specific ecology. For more than a century, different external ventures – colonial, nationalist, secessionist – encountered in the southern Sudanese marshlands a formidable buffer to the realization of their various projects of control. Ambitions of making the Nile water flow, establishing effective state authority, or building lines of communication, get stuck in the Sudd’s difficult terrain. Building on the political ecology and wider social theory on terrain, resistance and warfare, we conceptualize the Sudd as a lively political ecology – one characterized by constant struggles and accommodations between the centripetal logics of state-making and the centrifugal propensities of vernacular political culture.

КОРПОРАТИВНІ БІЗНЕС-МОДЕЛІ ВЕНЧУРНОГО ФІНАНСУВАННЯ: СУЧАСНІ МЕХАНІЗМИ

The article is devoted to the concept of corporate venture, which is based on the key methodological basis that the sources of innovation are formed both within and outside companies in the format of external ventures. They are founded by one or more companies on a share basis and take the form of organizational, economic and institutional forms of complex integration and cooperation structures and research consortia formed between autonomous and independent economic entities. Thus, one of the examples is strategic venture alliances, as one of the main institutional forms of external corporate venture. Next, we consider joint ventures created with the participation of donors and recipients of venture capital by establishing new legal entities or registration of the venture fund's participation in the share capital of high-tech companies. The advanced dynamics of techno-globalization processes against the background of unprecedented complication of the international business environment and the intensification of inter-firm competition for the most technologically breakthrough innovative developments raise the issue of mergers and acquisitions. Another organizational form of implementing external corporate venture mechanisms is the participation of companies in innovation clusters. There is also a rapid dynamization of cooperation of corporate venture funds with leading universities, research institutes, centers and laboratories. Therefore, it should be noted that external corporate venture is actively developing today in the general course of objective laws, patterns and trends of the global venture industry, demonstrating the high risks of venture investment, the predominant focus of BNP on innovation cooperation. This provides not only a significant increase in the economic efficiency of corporate R&D and expansion of existing innovation opportunities and sectoral-sectoral "space" of corporate business, but also the formation of its global "cognitive framework" as a full understanding of the nature and vector orientation of global market and technology transformations.

Next Generation External Venturing Practices in Family Owned Businesses

AbstractDrawing on an Entrepreneurship as Practice (EaP) approach, this article examines how next generation members in family owned businesses (FOBs) engage in external venturing. Our study builds on longitudinal qualitative research in two Mexican FOBs where the next generation launched ten ventures. It reveals five different practices of external venturing used by next generation family members: ‘obtaining family approval’, ‘bypassing family’, ‘family venture mimicking’, ‘jockeying in family’, and ‘jockeying around family’. The five practices are combined into three routes for external venturing: ‘imitating the family business’, ‘splitting the family business’, and ‘surpassing the family business’. Building on notions from Michel de Certeau’s practice theory, this study contributes to theorizing the five practices as ways of operating and the routes as modes of sensing to better understand how next generation family members deal with settings featured by dominant orders within the family and the FOB in their attempts to originate and launch their new ventures.

Customer-oriented innovations: Analysis of development practices (the case of North-West Russian regional companies)

The article describes the main stages in the development of methods for joint value creation for product and technological innovations, including: external ventures, open innovations and their support tools, and the current transition from open- to client-oriented innovations and their development and financing tools, including crowd-sourcing and crowd-funding. The use of client-oriented innovations leads to the transformation of companies’ business models. Involving buyers in creation and co-production becomes a key factor in this process. First, it ensures rapid adaptation to clients’ ever-changing needs. Second, sustainable and direct B2C partnerships enhance a company’s competitive position and efficiency. This article presents results of a field study on the practical application of joint venture creation tools in Russian innovation-oriented medium and large companies located in the North-West region. Representativeness of the survey is ensured through coverage of various sectors of the economy and businesses. The survey was conducted twice, in 2014 and 2017, which allowed a dynamic analysis. The study concludes that Russian innovation-oriented companies do not make sufficient use of target tools for creating joint value in the development of incremental innovations. At the same time, characteristics of innovation-oriented companies that influence the application of joint value creation methods were identified, including: novelty of innovations developed by the firm, company size, nature of the relationship with suppliers, etc. National innovation-oriented companies were given recommendations for using the methods of quality function deployment to increase the competitiveness of the developed innovations. It has been recommended to use CRM systems more actively for communicating with consumers.

Organizational Aspirations and External Venturing: The Contingency of Entrepreneurial Orientation

We contribute to the organizational aspirations and corporate venturing literature by theorizing and testing (a) the influence of a firm’s idiosyncratic strategic posture on behavioral responses to performance attainment discrepancies, and (b) that performance feedback may influence multifaceted yet thematically related forms of search. Specifically, we examine the influence of performance feedback on equity-based external corporate venturing. We then propose that a firm’s entrepreneurial orientation (EO) is a critical contingency when theorizing about how firms respond to attainment discrepancies. Our findings indicate that a firm’s EO is an important contingency when considering behavioral responses to attainment discrepancies.

The incentive effect of venture capital in bilateral partnership systems with the bias mono-stable Cobb–Douglas utility

Partnerships, between multiple sides that share goals and strive for mutual benefit, are ubiquitous both between and within the enterprises, and competition and cooperation are the fundamental characteristics in partnership systems. As the inherent effect of capital-product switching applied together with stochastic fluctuations of internal and external environments, the effects compete and cooperate to make the system achieve global optimum in the statistical sense. Thus motivated, we establish an over-damped nonlinear Langevin equation to describe the dynamical behaviors subject to the bias mono-stable Cobb–Douglas utility under the wealth-constraint condition. Based on linear response theory, we derive the performance indexes, including output signal-to-noise ratio, stationary unit risk return, systematic risk and bilateral risk, and stochastic resonance (SR) and reverse SR phenomena are observed by the simulations. Finally, we introduce one true example to explain the actual phenomenon observed from the practice. The purpose in this paper is to develop a quantitative method and associated prototype system beg the questions of how the external venture capital incents the partners especially associated with partnership success and what roles the internal and external risks play, respectively.

Always Look at the Bright Side? Managers’ Future Focus and Corporate external Venturing

Build on regulatory focus theory, I posit that manager’s attention to future could extert both facilitating and hindering effects on corporate entrepreneurship. The 6- year longitudinal analysis of...

The Regional Environment: Indianapolis - Insights from High-Growth Companies

As with other “typical” cities in the Midwest, Indianapolis often is overlooked in academic studies, but has much to offer the research, practice, and policy communities interested in entrepreneurship and its benefits (Motoyama et al., 2013). Our study supports the idea that Indianapolis - specifically, the greater Indianapolis/Carmel metropolitan area - represents an attractive place for business in its unique way (Max, 2013).Of special interest for regional competitiveness is a subset of companies: high-growth firms, also called gazelles, which make disproportionate economic contributions especially to job creation (Haltiwanger, Jarmin, and Miranda, 2013; Kolko and Newmark, 2007). Most research on high-growth firms focuses on their contributions to the regional and domestic economy, whereas few studies have examined the role of regional environment for high-growth firms (see Motoyama and Danley, 2012; Motoyama, 2015; Neumark and Wall, 2006).This study focuses on the regional environment for high-growth firms in the Indianapolis/Carmel area.Highlights of our findings are:• High-growth companies in Indianapolis were able to survive and grow largely without external angel or venture capital investments, two financial forms conventionally associated as the sources of growth. Most of the companies were initially financed by the founder/s, with personal funds being the most common mechanism. In addition, several entrepreneurs used bootstrapping of some kind.• High-growth firms in Indianapolis face challenges in recruiting and retaining the right talent. This is particularly the case for entry-level, recent college graduates and for technology-specific skilled talent.• However, there appears to be a “boomerang effect,” which draws many former residents back to the region after they have lived elsewhere, often for personal reasons such as raising children or being close to family.• High-growth firms in Indianapolis do not generally have strong direct business ties with other companies in the region, including with vendors and customers, nor do they have significant direct competition in the region.• The locational choice of high-growth entrepreneurs appears to be “by chance,” as opposed to a deliberate choice. Many people interviewed were already in the region and did not move to Indianapolis specifically for the purposes of starting or growing a company, but they also touted its many advantages.• Taking these findings together, people start businesses where they live. In other words, talented people in a region, such as entrepreneurs and technical experts, do not choose the place to start a business. This is in contrast to the currently dominant theories of the creative class. • Other regional advantages identified in interviews include market size, locational advantage of proximity to other major markets, and a “Midwestern work ethic,” which seems to imply a hardworking attitude without job-hopping.• Findings on the overall ecosystem are mixed. Most interviewees reported a generally positive overall environment, but not overwhelmingly so, and several interviewees indicated no effect or a negative impact of the overall ecosystem.

Search and Integration in External Venturing: An Inductive Examination of Corporate Venture Capital Units

Research summaryHow do external venturing units effectively achieve external knowledge search and integration of their initiatives with mainstream organizational units? We investigate this largely unexplored question through an inductive study of 17 corporate venture capital units. We document a set of five novel practices that influence the efficacy of a unit's external search and internal integration and identify how these practices complement a broader set of practices used by all units. We highlight the entrepreneurial nature of managing an external venturing unit, often to overcome unfavorable corporate contexts, a perspective that prior research has largely overlooked. Our findings provide unique insights into why some corporate investors are better at learning from external start‐ups than others.Managerial summaryExternal venturing involves strategic partnerships by established firms with entrepreneurial ventures. Top management usually tasks autonomous units with searching for willing and potentially valuable partners. These units must integrate their activities with the operations of parent firms to elicit cooperation from important business units. To understand how external venturing units implement search and integration in combination, we study corporate venture capital (CVC) units, which form external partnerships through minority investments in start‐ups. While all units adopted fundamental processes that are well established in the venture capital community, certain processes that are idiosyncratic to corporate investing helped units demonstrate superior performance in their strategic missions. These processes often required CVC unit managers to be entrepreneurial and politically savvy in building connections with relevant personnel in parent firms. Copyright © 2015 Strategic Management Society

Do Aspirations Influence Commitment to External Venturing? A Behavioral Theory Approach

External corporate venturing (ECV), which occurs when an established firm forms a tie with an external entrepreneurial venture, has received significant attention in both scholarly journals and bus...

Resource Stocks and Needs as Drivers of External Corporate Venturing

This article investigates why firms engage in different modes of external corporate venturing (ECV). To examine this issue, we utilize the resource-based view literature to examine how parent firm resource stocks and venture firm resource needs influence ECV activities. We root our story by exploring the relationship between the investing firm’s level of R&D intensity and ECV mode. We then consider how the parent firm’s human resource slack and the venture firm’s resource needs influence the relationship between R&D intensity and ECV mode. Our hypotheses are tested with a sample of over 3,400 external venturing ties formed over a 14 year period. Results suggest that R&D intensity influences external venturing activities, and that both the resource stocks of the parent and the resource needs of the venture moderate this relationship.

Exploration and Resource Commitments in Unequal Partnerships: An Examination of Corporate Venture Capital Investments

While established firms' relationships with external ventures may have significant strategic benefits, the realization of such benefits is fraught with considerable uncertainty. The real options and interorganizational learning literatures present an interesting trade‐off for established firms regarding commitment of resources in a partnership. This study seeks to enhance our understanding of how firms manage these trade‐offs when committing resources to external venturing initiatives. We examine the magnitude of resources initially committed by an established firm to an external venturing partnership in the context of corporate venture capital (CVC) investments. While a real options approach suggests that resource commitments should be lowered in the presence of uncertainty regarding realization of benefits, the interorganizational literature emphasizes that resource commitments may be essential for building quality relationships that expedite learning. Corporate investors, who invest in new ventures in order to gain strategic benefits, face higher uncertainty when their investment objectives involve greater exploration. However, greater exploration also increases investors' need to learn from their portfolio ventures. We, therefore, predicted that the degree of exploration would have aU‐shaped relationship with the investor's resource commitment in a venture. We also expected that factors that serve to decrease the investor's uncertainty, i.e., investor experience diversity and venture affiliation to prominent venture capitalists, would moderate the U‐shaped relationship between exploration and resource commitment. The predictions of the study are tested on a sample of 248 initial investments in private ventures made by incumbent firms in the computer, semiconductor, and telecommunications industries between 1996 and 2000. We find some support for our hypotheses. This study contributes to the external venturing literature onCVCinvestments by examining the determinants of the magnitude of resource commitment to new ventures, and integrates real options perspective, which advocates low resource commitments under uncertainty, with the organizational learning literature, which argues for greater resource commitment to secure partner cooperation. The results of this study reveal interesting insights into howCVCinvestors manage individual investments to generate strategic benefits.

External Venturing and Discontinuous Strategic Renewal: An Options Perspective

This study examines the relationship between a firm's venturing activities and its undertaking of strategic renewal. The study was motivated by some important gaps in the corporate entrepreneurship literature on venturing and renewal. The extant literature has not focused on the different types and dimensions of firms' renewal activities. In particular, discontinuous renewal involving shifts in firms' core businesses is not well understood. Moreover, the conditions that drive firms to undertake strategic renewal have not been examined. For example, it is not known how venturing increases or reduces the benefits of undertaking renewal. This study focuses on a discontinuous form of renewal involving major changes in firms' core businesses and examines firms' external venturing activities that complement their internal development. We examine corporate venture capital (CVC) investments, which are direct minority equity investments made by established companies in privately held ventures. Discontinuous renewal is conceptualized as resulting from a set of related, and often sequential, managerial decisions. The first managerial decision is to initiate growth in a business that is relatively newer or smaller for the organization. The second decision is to move away, or even withdraw completely, from the current core business that enabled prior growth and prosperity for the firm and served as its primary revenue earner. Employing a real options perspective, we argue that CVC investments create growth options in new and existing businesses but do not result in firms' withdrawal from existing businesses. Therefore, we expect CVC activity to be negatively associated with the likelihood of a firm undertaking discontinuous renewal. We also propose that the benefits of withdrawing from existing businesses are even lower, and the costs even higher, for firms in dynamic industries and for firms that possess strong internal capabilities. The predictions of the study are tested using longitudinal data on 477 firms from the 1990 Fortune 500 list for the period 1990–2000. We find support for all our predicted hypotheses. These results help address important limitations in the corporate entrepreneurship literature. The study also contributes to the real options and organizational capabilities literatures.

Female Entrepreneurship and Alternative Career Advancement Inside the Firm

Using unique data on mutual funds and hedge funds founded between 1979 and 2005, I assess gender differences in the pursuit of new ventures. Although women transition to entrepreneurship at lower rates than men, they are more likely to pursue an alternative venturing route available inside the established organization. Moreover, gender inequality in venturing rates disappears when the rates of both internal and external ventures are considered. The results further suggest that higher rates of female intrapreneurship are unlikely to arise because of gender differences in risk-taking behaviors, differential sorting, and differential labor supply. Instead, I find evidence consistent with the notion that women become intrapreneurs at higher rates because they are more successful at intrapreneurship than men and because organizations can evaluate their skills more accurately.