The Strategic Use of Corporate Venture Financing for Securing Demand
35 Pages Posted: 23 Feb 2002
Date Written: November 17, 2005
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: Suggested Citation