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Corporate Venture Capital, Value Creation, and Innovation

Forthcoming, Review of Financial Studies

49 Pages Posted: 23 Mar 2009 Last revised: 14 May 2014

Thomas J. Chemmanur

Boston College - Carroll School of Management

Elena Loutskina

University of Virginia - Darden School of Business

Xuan Tian

Tsinghua University - PBC School of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 5, 2013

Abstract

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

Chemmanur, Thomas J. and Loutskina, Elena and Tian, Xuan, Corporate Venture Capital, Value Creation, and Innovation (November 5, 2013). Forthcoming, Review of Financial Studies. Available at SSRN: https://ssrn.com/abstract=1364213 or http://dx.doi.org/10.2139/ssrn.1364213

Thomas J. Chemmanur

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Elena Loutskina

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-243-4031 (Phone)

Xuan Tian (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

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