The Life Cycle of Corporate Venture Capital

102 Pages Posted: 17 Nov 2015 Last revised: 27 Mar 2019

See all articles by Song Ma

Song Ma

Yale School of Management

Date Written: March 22, 2019

Abstract

This paper investigates why industrial firms conduct Corporate Venture Capital (CVC) investment in entrepreneurial companies. I test alternative views on CVC by exploiting the entry, investment, and termination decisions of CVC divisions. CVC entry concentrates in firms that experience deteriorations of internal innovation. At the investment stage, CVCs select startups with a similar technological focus but that have a non-overlapping knowledge base, and they integrate technologies generated from these ventures that create strategic value. CVCs are terminated when parent firms' innovation recovers. Overall, the strategic desire to fix innovation weaknesses after adverse shocks motivates firms to adopt CVCs.

Keywords: Corporate Venture Capital, Innovation, Entrepreneurship, R&D

JEL Classification: G24, G34, O32

Suggested Citation

Ma, Song, The Life Cycle of Corporate Venture Capital (March 22, 2019). Available at SSRN: https://ssrn.com/abstract=2691210 or http://dx.doi.org/10.2139/ssrn.2691210

Song Ma (Contact Author)

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States

HOME PAGE: http://faculty.som.yale.edu/songma/

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