Abstract

http://ssrn.com/abstract=1873957
 
 

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Corporate Venture Capital as a Real Option in the Markets for Technology


Marco Ceccagnoli


Scheller College of Business, Georgia Tech

Matthew John Higgins


Georgia Institute of Technology - Scheller College of Business; National Bureau of Economic Research (NBER)

Hyunsung Daniel Kang


Adelphi University - School of Business

June 28, 2011


Abstract:     
Despite the fact that one of the main goals of corporate venture capital (CVC) investments in high-tech industries is to gain a window on future technologies, the relationship between CVC investments and other common strategies used to acquire existing technologies, such as licensing, has not been fully explored. To address this gap, we build on the real option literature suggesting that CVC investments can be used as real options in the markets for technology. Accordingly, we formulate hypotheses about key drivers of the option value of CVC investments and the decision to exercise the option. Using a longitudinal dataset on the external R&D activities of 598 dyads of global pharmaceutical firms and their technology partners, we find that corporate investors’ scientific capabilities, technological domains, research pipelines, and the resolution of exogenous uncertainty related to partner firms’ technologies impact investors’ decisions on CVC investments and ex post technology acquisition. In our research setting, the most common way to exercise the option post-CVC investment is via technology licensing.

Number of Pages in PDF File: 42

Keywords: corporate venture capital, market for technology, R&D, scientific capability, product pipeline, technological distance

JEL Classification: G34, L24, L65, O32

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Date posted: June 28, 2011 ; Last revised: June 13, 2014

Suggested Citation

Ceccagnoli, Marco and Higgins, Matthew John and Kang, Hyunsung Daniel, Corporate Venture Capital as a Real Option in the Markets for Technology (June 28, 2011). Available at SSRN: http://ssrn.com/abstract=1873957 or http://dx.doi.org/10.2139/ssrn.1873957

Contact Information

Marco Ceccagnoli
Scheller College of Business, Georgia Tech ( email )
800 W Peachtree St. NW
Atlanta, GA 30308-0520
United States
Matthew John Higgins (Contact Author)
Georgia Institute of Technology - Scheller College of Business ( email )
800 West Peachtree Street
Atlanta, GA 30308
United States
404-894-4368 (Phone)
404-894-6030 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Hyunsung Daniel Kang
Adelphi University - School of Business ( email )
Garden City, NY 11530
United States
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