Publicly-Listed Family-Controlled Firms and Corporate Venture Capital: A Socioemotional Wealth Approach

Abstract

Despite the worldwide prevalence of publicly listed family-controlled firms (FCFs), the question of how family control affects their corporate venture capital (CVC) investment strategy remains unexplored. Drawing on socioemotional wealth (SEW) theory, we argue that FCFs are less prone to invest in CVC than non-FCFs and, when they do, FCFs make fewer but larger CVC investments than non-FCFs. Since CVC affects the family’s socioemotional endowments, FCFs pursue such a CVC strategy to enhance control over the start-ups and focus on later-stage ventures to reduce risk. We also argue that an independent board of directors limits the FCFs’ capacity to pursue SEW-driven CVC investment behavior. Based on a sample of 257 technologically intensive U.S. publicly-listed firms, empirical evidence was found that is consistent with the hypotheses.

Keywords: corporate venture capital, family firms, venture capital, corporate entrepreneurship, entrepreneurship, socioemotional wealth