Yohanes E. Riyanto () (National University of Singapore) Armin Schwienbacher () (The University of Namur, Center for Research in Finance and Management (CeReFiM) and UC Berkeley, Haas School of Business)
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In this paper, we focus on the strategic role of corporate venture financing by a corporation in securing own demand. When the headquarter finances the venture through the corporate venture capitalist, he commits himself to compensate the venture for the effort to increase the complementarity between its product and the headquarter's product. The headquarter therefore faces the following trade-off: either be more aggressive ex post in the product market (by undercutting more its rivals) or use corporate venture financing to affect the venture's product innovation outcome to weaken ex post competition with substitute products. This allows him to secure demand for his own product.
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Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number
wp0109.
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