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Corporate venture capital and the balance of risks and rewards for portfolio companies

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  • Maula, Markku V.J.
  • Autio, Erkko
  • Murray, Gordon C.
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    Abstract

    This paper contributes to the literature on corporate venture capital (CVC) by examining the management of CVC investments from the perspective of the investee firm. We focus on the trade-off between social interactions and relationship safeguards and examine their effects on the twin relationship outcomes of learning benefits and risks. The model is tested using data collected from CEOs of U.S. technology-based new firms receiving CVC funding. Complementarities between the investee firm and its CVC investor are positively related to the level of social interaction and negatively related to the use of different types of relationship safeguards by the investee firm. The use of safeguards is further negatively related to both realized relationship risks and social interaction. Social interaction is positively related to realized learning benefits. These findings highlight the fine balance that the investee firm has to strike between openness and self protection in a CVC relationship. Implications for future research and current practice are discussed.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 24 (2009)
    Issue (Month): 3 (May)
    Pages: 274-286

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    Handle: RePEc:eee:jbvent:v:24:y:2009:i:3:p:274-286

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    Web page: http://www.elsevier.com/locate/jbusvent

    Related research

    Keywords: Corporate venture capital Technology-based new firms Complementarities Relationship risks Relationship learning benefits;

    References

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    1. Africa Ariño & Roberto Ragozzino & Jeffrey J. Reuer, 2008. "Alliance Dynamics for Entrepreneurial Firms," Journal of Management Studies, Wiley Blackwell, Wiley Blackwell, vol. 45(1), pages 147-168, 01.
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    10. Markku Maula & Erkko Autio & Gordon Murray, 2005. "Corporate Venture Capitalists and Independent Venture Capitalists: What do they know, Who do They Know and Should Entrepreneurs Care?," Venture Capital, Taylor & Francis Journals, Taylor & Francis Journals, vol. 7(1), pages 3-21, January.
    11. Henrik Bresman & Julian Birkinshaw & Robert Nobel, 1999. "Knowledge Transfer in International Acquisitions," Journal of International Business Studies, Palgrave Macmillan, vol. 30(3), pages 439-462, September.
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    13. Jarillo, J. Carlos, 1989. "Entrepreneurship and growth: the strategic use of external resources," Journal of Business Venturing, Elsevier, vol. 4(2), pages 133-147, March.
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    Cited by:
    1. Fischer, Eileen & Reuber, A. Rebecca, 2011. "Social interaction via new social media: (How) can interactions on Twitter affect effectual thinking and behavior?," Journal of Business Venturing, Elsevier, vol. 26(1), pages 1-18, January.

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