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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.

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.

Suggested Citation

  • Maula, Markku V.J. & Autio, Erkko & Murray, Gordon C., 2009. "Corporate venture capital and the balance of risks and rewards for portfolio companies," Journal of Business Venturing, Elsevier, vol. 24(3), pages 274-286, May.
  • Handle: RePEc:eee:jbvent:v:24:y:2009:i:3:p:274-286
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    3. David Bendig & Simon Hensellek & Julian Schulte, 2024. "Beneficial, Harmful, or Both? Effects of Corporate Venture Capital and Alliance Activity on Product Recalls," Entrepreneurship Theory and Practice, , vol. 48(1), pages 35-70, January.
    4. Patrick Röhm, 2018. "Exploring the landscape of corporate venture capital: a systematic review of the entrepreneurial and finance literature," Management Review Quarterly, Springer, vol. 68(3), pages 279-319, August.
    5. Kang Hyunsung D, 2018. "A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry," Entrepreneurship Research Journal, De Gruyter, vol. 8(3), pages 1-19, July.
    6. Petrit Ademi & Monika C. Schuhmacher & Andrew L. Zacharakis, 2023. "Evaluating Affordance-Based Opportunities: A Conjoint Experiment of Corporate Venture Capital Managers’ Decision-Making," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2293-2322, November.
    7. Veer, Theresa & Yang, Philip & Riepe, Jan, 2022. "Ventures' conscious knowledge transfer to close partners, and beyond: A framework of performance, complementarity, knowledge disclosure, and knowledge broadcasting," Journal of Business Venturing, Elsevier, vol. 37(3).
    8. Wadhwa, Anu & Phelps, Corey & Kotha, Suresh, 2016. "Corporate venture capital portfolios and firm innovation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 95-112.
    9. Ikenna Uzuegbunam & Brandon Ofem & Satish Nambisan, 2019. "Do Corporate Investors Affect Entrepreneurs’ IP Portfolio? Entrepreneurial Finance and Intellectual Property in New Firms," Entrepreneurship Theory and Practice, , vol. 43(4), pages 673-696, July.
    10. Shivaram V. Devarakonda & Jeffrey J. Reuer, 2019. "Safeguarding from the Sharks: Board Representation in Minority Equity Partnerships," Organization Science, INFORMS, vol. 30(5), pages 981-999, September.
    11. 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.
    12. Steven Rottmann, 2019. "Corporate Venturing Evaluation: How Start-Up Performance is Measured in Corporate Venturing During the Collaboration Phase," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 5(2), pages 185-199.
    13. Stefanie Weniger & Svenja Jarchow, 2023. "Between benefit and risk: how entrepreneurs evaluate corporate investors," Journal of Business Economics, Springer, vol. 93(5), pages 783-816, July.
    14. Luc Armel G. Da Gbadji & Benoit Gailly & Armin Schwienbacher, 2015. "International Analysis of Venture Capital Programs of Large Corporations and Financial Institutions," Entrepreneurship Theory and Practice, , vol. 39(5), pages 1213-1246, September.
    15. Shuwaikh, Fatima & Dubocage, Emmanuelle, 2022. "Access to the Corporate Investors' Complementary Resources: A Leverage for Innovation in Biotech Venture Capital-Backed Companies," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
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