Corporate Venture Capital, Value Creation, and Innovation
Thomas J. Chemmanur
Boston College - Carroll School of Management
University of Virginia - Darden School of Business
Indiana University - Kelley School of Business - Department of Finance
November 5, 2013
Forthcoming, Review of Financial Studies
We analyze how corporate venture capital (CVC) differs from independent venture capital (IVC) in nurturing innovation in entrepreneurial firms. We find that CVC-backed firms are more innovative, as measured by their patenting outcome, although they are younger, riskier, and less profitable than IVC-backed firms. Our baseline results continue to hold in a propensity-score-matching analysis of IPO firms and a difference-in-differences analysis of the universe of VC-backed entrepreneurial firms. We present evidence consistent with two possible underlying mechanisms: CVCs’ greater industry knowledge due to the technological fit between their parent firms and entrepreneurial firms and CVCs’ greater tolerance for failure.
Number of Pages in PDF File: 49
Keywords: Innovation, Corporate Venture Capital, Value Creation, Patents, Citations
JEL Classification: G24, G23, O31
Date posted: March 23, 2009 ; Last revised: May 14, 2014
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