Corporate venture capital program autonomy, corporate investors’ attention and portfolio diversification

Abstract

Purpose

From the attention-based view, the purpose of this paper is to examine how structural autonomy of a corporate venture capital (CVC) program influences its CVC managers’ investment decisions with regard to investment portfolio diversification.

Design/methodology/approach

This study collects data from VentureXpert, Compustat, and the US Patent Office. The final sample consists of 868 CVC portfolio-year observations from 1990 to 2004. Panel linear regressions and hierarchical linear regressions are used in the analysis.

Findings

The major finding of this study reveals that that structural autonomy of a CVC program is significantly related to its investment portfolio diversification. In addition to the direct effect, the authors also find that CVC structure autonomy moderates the relationship between corporate investor’s strategic attention and its CVC portfolio diversification. Specifically, when the autonomous level of a CVC program is high, the negative relationship between its parent’s relative growth potentials and CVC portfolio diversification will become positive, and the positive relationship between its parent’s business diversification and CVC portfolio diversification will become negative.

Originality/value

The CVC literature has suggested the impact of CVC portfolio diversification on value creation for corporate investors (e.g. Yang et al., 2014), however, few studies have investigated why some corporate investors diversify their portfolio of venture companies while others do not. To fill such a gap, this study identifies antecedents of CVC portfolio diversification such as CVC structural autonomy and corporate investor’s strategic attention as well as their interactive impacts. The finding also provides valuable managerial implications on CVC program designs.

Citation

Yang, Y., Chen, T. and Zhang, L. (2016), "Corporate venture capital program autonomy, corporate investors’ attention and portfolio diversification", Journal of Strategy and Management, Vol. 9 No. 3, pp. 302-321. https://doi.org/10.1108/JSMA-03-2015-0023