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

2016 ◽  
Vol 9 (3) ◽  
pp. 302-321 ◽  
Author(s):  
Yi Yang ◽  
Tianxu Chen ◽  
Lei Zhang
Keyword(s):  
Venture Capital ◽  
Negative Relationship ◽  
Portfolio Diversification ◽  
Corporate Venture Capital ◽  
Investment Portfolio ◽  
Content Type ◽  
Corporate Venture ◽  
Corporate Investors ◽  
The Impact ◽  
Linear Regressions

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.

The impact of corporate venture capital involvement in syndicates

2019 ◽  
Vol 57 (1) ◽  
pp. 131-151 ◽  
Author(s):  
Shinhyung Kang
Keyword(s):  
Venture Capital ◽  
Initial Public Offering ◽  
Proportional Hazards Model ◽  
Negative Relationship ◽  
Cox Proportional Hazards ◽  
Cox Proportional Hazards Model ◽  
Corporate Venture Capital ◽  
Content Type ◽  
Corporate Venture ◽  
The Impact

Purpose 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. Design/methodology/approach 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). Findings 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. Originality/value 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.

Alleviating concerns of misappropriation in corporate venture capital: Creating credible commitments and calculative trust

2020 ◽  
pp. 147612702092617
Author(s):  
Joshua B Sears ◽  
Michael S McLeod ◽  
Robert E Evert ◽  
G Tyge Payne
Keyword(s):  
Intellectual Property ◽  
Venture Capital ◽  
Corporate Venture Capital ◽  
Credible Commitments ◽  
Venture Investment ◽  
Corporate Venture ◽  
Transaction Costs Economics ◽  
Corporate Investors ◽  
Using Data ◽  
Capital Investor

Ventures are often hesitant to accept corporate venture capital due to concerns of intellectual property misappropriation. This is likely to be especially true with startup stage ventures operating in weak intellectual property rights regimes. Drawing on transaction costs economics and game theory, we examine how corporate investors might alleviate concerns of misappropriation by establishing credible commitments to their corporate venture capital program, which discourages opportunistic behavior. We submit that corporate investors can demonstrate credible commitments through prior investment quantity and prior investment continuity, therefore increasing the chances of forming a corporate venture capital–venture investment relationship. Our findings—using data from 11,136 ventures, 300 corporate venture capital investors, and 1782 investments across 18 years—demonstrate that ventures are more likely to pair with corporate venture capital investors that have made a credible commitment to their corporate venture capital program. Also, we find evidence that both quantity and continuity possess an enhanced effect on alleviating fears of misappropriation when a startup venture operates in the same industry as a potential corporate venture capital partner; this is because the corporate venture capital investor possesses both the absorptive capacity to understand the venture’s intellectual property and complementary capabilities to beat them to market.

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