Technology Disclosure and Corporate Venture Capital Investments
49 Pages Posted: 16 Feb 2016 Last revised: 18 Apr 2018
Date Written: April 24, 2017
We investigate how technology disclosure drives the formation of investment relations between startups and corporate venture capitals (CVC). On the one hand, technology disclosure enables CVCs to evaluate startups better, make less risky investment decisions and thus, increases the likelihood of investment relations. On the other hand, such disclosure may satisfy the technology-acquisition objectives of CVCs, reducing CVCs willingness to form an investment relation after disclosure. We exploit the American Inventor’s Protection Act as an exogenous change to high-tech startups’ technology disclosure through their patent documents. The results show that technology disclosure increases the likelihood of investment relations between startups and CVCs. The effect is stronger in environments with more information constraints between startups and CVC.
Keywords: corporate venture capital, startup, investment relation, disclosure, information constraint, misappropriation
JEL Classification: G14, L26, M13, O32
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