Corporate Venture Capital and the Boundaries of the Firm
62 Pages Posted: 23 Mar 2018 Last revised: 1 Mar 2019
Date Written: January 1, 2019
This study examines the strategic overlap between a Corporate Venture Capital (CVC) investor and an entrepreneurial firm in the product, market, and technology spaces. Using this measure, I explore an incumbent’s decision to invest into, versus acquire, a startup in a comparative setting. I show that CVC’s distinct features regarding property rights and information acquisition are preferred when the strategic overlap is low. Consistent with the property rights and option-like features of VC contracts, this link between strategic overlap and firm boundary decision is stronger when industry competition is low and startup maturity is high.
Keywords: corporate venture capital, entrepreneurial finance, boundaries of the firm, machine learning, strategic investments, acquisition
JEL Classification: G24, G34, L26
Suggested Citation: Suggested Citation