Search results

The fast-changing, highly competitive and technology-driven business environment forces established firms to continually search for new business opportunities and innovative ideas. In reaction, corporations such as Google, Microsoft, Cisco and Bertelsmann have launched new corporate venture capital (CVC) units or have intensified existing CVC activities. This chapter examines the structure, patterns and investment focus of telecommunication, IT, consumer electronics and media & entertainment firms’ CVC investments by conducting a data-mining project based on the Thomson Reuters Private Equity database. The data-mining project reveals the increasing importance of CVC activities as a strategic development tool to address the requirements of the increasing costs, speed and complexity of a technology-driven industry since the bursting of the Internet bubble. Therefore, following chapter is one of the first CVC studies to describe and compare CVC investments of the last CVC wave across industry sectors.

The availability of external equity finance is a key factor in the development of technology‐based firms (TBFs). However, although a wide variety of sources are potentially available, many firms encounter difficulties in securing funding. The venture capital community, particularly in the UK, has done little to finance early stage TBFs and has failed to cater adequately for the specific value‐added requirements of these firms. Non‐financial companies have the potential to become an important alternative source of equity finance for TBFs through the process of corporate venture capital (CVC) investment. Based on a telephone survey of 48 UK TBFs that have raised CVC, examines the role of CVC in the context of TBF equity financing. Shows that CVC finance has represented a significant proportion of the total external equity raised by the survey firms and has been particularly important during the early stages of firm development. In addition, CVC often provides investee firms with value‐added benefits, primarily in the form of technical‐ and marketing‐related nurturing and credibility in the marketplace. Concludes with implications for TBFs, large companies, venture capital fund managers and policy makers.

One increasingly popular financing option for entrepreneurial ventures is to attract corporate venture capital (CVC) investments. Prior research tends to take a CVC-centric perspective assessing the benefits and contingencies for incumbent firms or corporate investors to engage with entrepreneurial ventures. Few studies have taken the opposite perspective of investigating factors that entrepreneurial ventures need to take into account when engaging with CVC investments. As such, this study aims to investigate pre- and post-IPO entrepreneurial venture performance that partners with CVC providers or corporate investors, as well as to assess organizational and environmental contingencies.

This study draws on a sample of 631 entrepreneurial ventures from the CSMAR database ranging from 2009 to 2019, along with CVC financing data from the CVSource database and financial data in entrepreneurial ventures’ annual reports from the Juchao Network. This study applies multiple linear regression modelling and fixed effect panel data analyses to test the proposed hypotheses.

The results show that CVC investment contributes to entrepreneurial ventures’ financial performance, both pre- and post-IPO. However, while research and development (R&D) intensity and geographic proximity strengthen the positive relationship between CVC investment and entrepreneurial ventures’ performance pre-IPO, R&D intensity has a negative moderating effect on the relationship between CVC investment and entrepreneurial ventures’ performance post-IPO.

First, in emerging economies, adopting a CVC financing strategy is an important strategic choice for entrepreneurial ventures that have a great demand for external capital, resources and technology support. Second, leveraging the relationship between external financing and internal R&D investment is essential for them to maintain their core competitiveness and sustainable growth. Moreover, entrepreneurial ventures should deal with the coopetitive relationship with incumbent companies and manage their dependency on other market participants in the external environment.

This study focuses on the performance implications for entrepreneurial ventures engaging with CVC investments pre- and post-IPO. First, this study broadens and expands prior research on the mechanism of the relationship between CVC and entrepreneurial ventures’ financial performance. Second, the research conducts a comparative study of the moderating effects of different timings. Third, this study applies learning theory to the field of CVC in emerging economies.

Building 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.

This 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.”

This 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.

This study presents systematic evidence to the subject concerning ventures’ type of investors and its effect on the startups’ IPO valuations.

This 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.

To 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.

The purpose of this paper is to investigate impacts of governance characteristics and bilateral inter‐organizational learning on performance in the context of corporate venture capital (CVC) activity.

Based on a dataset of 232 CVC investments, the author examined how characteristics such as autonomy, incentive scheme, and broad representation of a CVC program and the knowledge inflows and outflows of the corporate investors impacted the corporate investor's innovativeness and the portfolio company's performance.

The results show that knowledge outflows from corporate investors can help enhance their portfolio companies' performance. In addition, incentive scheme and autonomy may facilitate knowledge inflows from portfolio companies to corporate investors, and influence the performance of both corporate investors and portfolio companies.

The paper's findings contribute to the inter‐organizational learning literature by empirically analysing the mutual learning processes in the context of corporate venturing. The paper extends corporate venturing literature by linking governance characteristic to the underlying mechanism of inter‐organizational learning between the corporate investors and the portfolio companies, as well as their performance.

Prior research underscores the critical role of prestigious underwriters in shaping the success of the initial public offering (IPO) process, particularly for young firms that do not have much of a track record. Recent scholarly work has shown that the likelihood of a start-up securing a lead prestigious underwriter is influenced by its ability to provide important signals of organizational legitimacy, as conveyed in the employment experiences of the firm's top management team. Building further on theories of organizational attention and decision making, this chapter seeks to examine whether lead prestigious underwriters also consider different types of signals of organizational legitimacy that might be suggested by the existence of ties between young firms and corporate venture capital (CVC) investors.Analysis of 1830 IPOs during 1990–1999 indicates that having a tie to CVC investor provides added legitimacy value over that provided by independent venture capital investors alone. Further analysis of 315 IPOs affiliated with CVC investors suggests that prestigious underwriters pay attention primarily to endorsement-rather than resource-related signals of legitimacy when it comes to CVC ties, and that they pay more attention to investment screening prominence than to business management prominence when it comes to endorsement legitimacy. We also found that prestigious underwriters pay more attention to signals of IPO legitimacy provided by CVC investment in IPO markets that are hot than those that are cold. Our findings provide important theoretical extensions to the study of the certification value of interorganizational affiliations and its impact on IPO success.

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.

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.

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.

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.

Which 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.

This study uses a panel dataset of 502 high-tech ventures and runs the Heckman model to correct potential endogeneity issues.

The 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.

This study provides insights into how to leverage venture capital to develop new products effectively and efficiently.

This 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.

Literature 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.

The 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.

The 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.

The 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.

Prior literature indicates that syndication enhances the likelihood of ventures’ successful exits; however, it has neglected the differences among venture capital (VC) investor types. In fact, there are various types of VC investors with distinctive objectives. Therefore, by focusing on ventures backed by corporate venture capital (CVC) and independent venture capital (IVC) investors, the purpose of this paper is to investigate how the relative influence among a heterogeneous group of VC investors in a syndicate affects the likelihood of the venture’s successful exit.

A sample of 1,121 US ventures that received funding from both CVC and IVC investors during 2001 and 2013 are collected. Then, a Cox proportional hazards model is applied to analyze the likelihood of a successful exit (i.e. initial public offering or acquisition).

The relative reputation of CVC investors vis-à-vis their IVC co-investors in a syndicate is negatively associated with the likelihood of the venture’s successful exit. This negative relationship is exacerbated when CVC investors are geographically close to the focal venture, and it is weakened when CVC investors syndicate with IVC investors that they have collaborated in the past.

First, this paper advances VC syndication literature by demonstrating that syndication does not positively affect the likelihood of a venture’s successful exit unless key syndicate members seek to pursue going public or acquisition strategy. Second, this paper also reveals when CVC is beneficial from the ventures’ perspective. CVC participation facilitates ventures’ successful exits as long as reputable IVC investors are present in the syndicate. Third, this study contributes to the multiple agency perspective by showing that formal governance mechanisms affect ventures’ conduct and performance as well as informal sources of power.