Corporate Venture Capital and the Balance of Risks and Rewards for Portfolio Companies

Posted: 13 Oct 2008 Last revised: 29 Apr 2009

See all articles by Markku V. J. Maula

Markku V. J. Maula

Aalto University, Department of Industrial Engineering and Management

Erkko Autio

HEC Lausanne

Gordon C. Murray

University of Exeter Business School

Date Written: May 1, 2009

Abstract

This paper contributes to the literature on corporate venture capital (CVC) by examining the management of CVC investments from the perspective of the investee firm. We focus on the trade-off between social interactions and relationship safeguards and examine their effects on the twin relationship outcomes of learning benefits and risks. The model is tested using data collected from CEOs of U.S. technology-based new firms receiving CVC funding. Complementarities between the investee firm and its CVC investor are positively related to the level of social interaction and negatively related to the use of different types of relationship safeguards by the investee firm. The use of safeguards is further negatively related to both realized relationship risks and social interaction. Social interaction is positively related to realized learning benefits. These findings highlight the fine balance that the investee firm has to strike between openness and self protection in a CVC relationship. Implications for future research and current practice are discussed.

Keywords: corporate venture capital, technology-based new firms, complementarities, relationship risks, relationship learning benefits

JEL Classification: D21, D23, G24, L14, M13, M21, O31

Suggested Citation

Maula, Markku V. J. and Autio, Erkko and Murray, Gordon C., Corporate Venture Capital and the Balance of Risks and Rewards for Portfolio Companies (May 1, 2009). Journal of Business Venturing, Vol. 24, No. 3, pp. 274-286, Available at SSRN: https://ssrn.com/abstract=1281449

Markku V. J. Maula (Contact Author)

Aalto University, Department of Industrial Engineering and Management ( email )

PO Box 15500
FI-00076 AALTO
Espoo
Finland

HOME PAGE: http://users.aalto.fi/mmaula/

Erkko Autio

HEC Lausanne ( email )

Institut Stratège
BFSH1
Lausanne, 1015
Switzerland

Gordon C. Murray

University of Exeter Business School ( email )

Streatham Court
Rennes Drive
Exeter EX4 4PU
United Kingdom
+44 777 522 0857 (Phone)

HOME PAGE: http://business-school.exeter.ac.uk/staff/profile.php?id=34

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