The Strategic Use of Corporate Venture Financing for Securing Demand

35 Pages Posted: 23 Feb 2002

See all articles by Yohanes E. Riyanto

Yohanes E. Riyanto

Nanyang Technological University (NTU) - Division of Economics

Armin Schwienbacher

SKEMA Business School

Date Written: November 17, 2005

Abstract

This paper focuses on the strategic role of corporate venture-financing carried out by a corporation (a headquarter). When the headquarter finances a venture through its corporate venture-financing arm, it can increase the complementarity between products of the venture and the headquarter. The effect of having an increase in complementarity is a softening of ex-post product-market competition with rival products. Hence, in deciding whether to finance the venture, the headquarter faces a trade-off between, on the one hand, being more aggressive ex-post in the product market, and, on the other hand, using venture financing to soften ex-post competition with substitute products.

Keywords: venture capital, link between product market and financial market, innovation, entrepreneurship, corporate finance

JEL Classification: D21, D43, G32, G34, L13, L20

Suggested Citation

Riyanto, Yohanes E. and Schwienbacher, Armin, The Strategic Use of Corporate Venture Financing for Securing Demand (November 17, 2005). EFA 2002 Berlin. Available at SSRN: https://ssrn.com/abstract=300601 or http://dx.doi.org/10.2139/ssrn.300601

Yohanes E. Riyanto (Contact Author)

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

Armin Schwienbacher

SKEMA Business School ( email )

Lille
France

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