Abstract

http://ssrn.com/abstract=1275922
 


 



Corporate Venture Capital as an Exploratory Mechanism


Gautam Rangan


affiliation not provided to SSRN

Daniel Robeson


The Sage Colleges; Rensselaer Polytechnic Institute

August 1, 2008


Abstract:     
This study analyzes the conditions under which Corporate Venture Capital (CVC) investments create growth options for the large firm. Using a real options perspective, the study hypothesizes that number of CVC investments is positively correlated to the number of growth options generated for the large firm. It is also hypothesized that the value generated from the CVC investments is higher when the CVC is undertaken through a dedicated subsidiary, when the CVC sponsoring firm has a high R&D intensity and when firms pursue international CVC investments. Results on a 8 year panel study comprising of 490 CVC investments undertaken between 1994 and 2002 suggest that number of CVC investments is positively correlated to the growth options generated for the large firm. The value generated from the CVC investments was also seen to be higher when the firms had a high R&D intensity. However, contrary to the hypothesis, the results suggested that CVC's undertaken through dedicated subsidiaries create lower value when compared to CVC's undertaken by groups which are a part of the larger corporation. Finally, implications for theory and practice are suggested.

Keywords: Corporate Venture Capital, Real Options, Growth Options

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Date posted: October 1, 2008 ; Last revised: February 8, 2010

Suggested Citation

Rangan, Gautam and Robeson, Daniel, Corporate Venture Capital as an Exploratory Mechanism (August 1, 2008). Available at SSRN: http://ssrn.com/abstract=1275922 or http://dx.doi.org/10.2139/ssrn.1275922

Contact Information

Gautam Kasthurirangan (Contact Author)
affiliation not provided to SSRN
Daniel Robeson
The Sage Colleges ( email )
140 New Scotland Avenue
Albany, NY 12208
United States
518 292-8657 (Phone)
HOME PAGE: http://www.sage.edu/academics/management
Rensselaer Polytechnic Institute ( email )
Troy, NY 12180
United States
(518) 330-4051 (Phone)
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