An Option to Ally: A Dyadic Analysis of Corporate Venture Capital Relationships

26 Pages Posted: 16 Feb 2010 Last revised: 26 Jan 2019

See all articles by Anu Wadhwa

Anu Wadhwa

Ecole Polytechnique Fédérale de Lausanne - Management of Technology and Entrepreneurship Institute (MTEI)

Corey C. Phelps

McGill University

Date Written: February 15, 2010

Abstract

This paper takes a real options view of corporate venture capital (CVC), which are direct minority equity investments made by established companies in privately held entrepreneurial ventures. CVC investments have been characterized as creating growth options for corporate investors. We argue corporate investors often exercise these growth options by forming strategic alliances with their portfolio firms. We identify and empirically test a set of factors that lead established firms to exercise the growth options embedded in CVC investments by forming strategic alliances with the entrepreneurial ventures in which they invested. We explore how uncertainty surrounding a CVC investment influences the likelihood of future alliance formation.

Keywords: corporate venture capital, alliancce formation, real options

JEL Classification: L22, G24, L63, M13

Suggested Citation

Wadhwa, Anu and Phelps, Corey C., An Option to Ally: A Dyadic Analysis of Corporate Venture Capital Relationships (February 15, 2010). Atlanta Competitive Advantage Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1553322 or http://dx.doi.org/10.2139/ssrn.1553322

Anu Wadhwa

Ecole Polytechnique Fédérale de Lausanne - Management of Technology and Entrepreneurship Institute (MTEI) ( email )

Odyssea
Station 5
Lausanne, 1015
Switzerland

Corey C. Phelps (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

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