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Corporate venture capital and the returns to acquiring portfolio companies

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  • Benson, David
  • Ziedonis, Rosemarie H.
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    Abstract

    A prominent motive for corporate venture capital (CVC) is the identification of entrepreneurial-firm acquisition opportunities. Consistent with this view, we find that one of every five startups purchased by 61 top corporate investors from 1987 through 2003 is a venture portfolio company of its acquirer. Surprisingly, our analysis reveals that takeovers of portfolio companies destroy significant value for shareholders of acquisitive CVC investors, even though these same investors are "good acquirers" of other entrepreneurial firms. We explore numerous explanations for these puzzling findings, which seem rooted in managerial overconfidence or agency problems at the program level.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 98 (2010)
    Issue (Month): 3 (December)
    Pages: 478-499

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    Handle: RePEc:eee:jfinec:v:98:y:2010:i:3:p:478-499

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate venture capital Acquisitions Entrepreneurial finance Governance Overconfidence;

    References

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    Cited by:
    1. Marco Da Rin & Thomas F. Hellmann & Manju Puri, 2011. "A survey of venture capital research," NBER Working Papers 17523, National Bureau of Economic Research, Inc.
    2. Jean-Sébastien Lantz & Jean-Michel Sahut & Frédéric Teulon, 2014. "What is the Real Role of Corporate Venture Capital ?," Working Papers 2014-252, Department of Research, Ipag Business School.

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