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

48 Pages Posted: 28 Jun 2011 Last revised: 9 Nov 2015

Marco Ceccagnoli

Scheller College of Business at Georgia Tech

Matthew John Higgins

Georgia Institute of Technology & NBER; National Bureau of Economic Research (NBER)

Hyunsung D. Kang

Adelphi University - School of Business

Multiple version iconThere are 3 versions of this paper

Date Written: July 22, 2015

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 strategies used to acquire technologies in the markets, such as licensing, has not been adequately 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 based on 604 dyads formed by a sample of global pharmaceutical firms and their external 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.

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

JEL Classification: G34, L24, L65, O32

Suggested Citation

Ceccagnoli, Marco and Higgins, Matthew John and Kang, Hyunsung D., Corporate Venture Capital as a Real Option in the Markets for Technology (July 22, 2015). Georgia Tech Scheller College of Business Research Paper No. 2. Available at SSRN: https://ssrn.com/abstract=1873957 or http://dx.doi.org/10.2139/ssrn.1873957

Marco Ceccagnoli

Scheller College of Business at Georgia Tech ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Matthew John Higgins (Contact Author)

Georgia Institute of Technology & NBER ( 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 D. Kang

Adelphi University - School of Business ( email )

Garden City, NY 11530
United States

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