Corporate Venture Capital, Value Creation, and Innovation
Forthcoming, Review of Financial Studies
49 Pages Posted: 23 Mar 2009 Last revised: 14 May 2014
Date Written: November 5, 2013
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.
Keywords: Innovation, Corporate Venture Capital, Value Creation, Patents, Citations
JEL Classification: G24, G23, O31
Suggested Citation: Suggested Citation