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What drives CVC investments? An Empirical Test of Social Network Theory Predictions

Author

Listed:
  • Jean-michel Sahut

    (IDRAC Business School, France & HEG Fribourg-University of Applied Sciences Western Switzerland)

  • Eric Braune

    (INSEEC, Lyon, France)

  • Frédéric Teulon

    (IPAG Business School, IPAG – Lab, France)

Abstract

Using data on corporate venture capital (CVC) investments by 284 US industrial companies between 2001 and 2013, we analyze the CVC expenditures of each based on their prior position in the syndication network and their financial resources. The generalized-method-of-moments models used show that the annual amount of CVC expenditures of these companies depends on the prior number of co-financing relations they have and their cash flows in the previous year, as well as their prior investments. However, the previous centrality of the industrial companies in syndication networks is insignificant, meaning that prior centrality in the VC network does not guide their current CVC expenditures. This result goes against social network theory, which stipulates that the network members strive to improve their centrality in the network they belong.

Suggested Citation

  • Jean-michel Sahut & Eric Braune & Frédéric Teulon, 2017. "What drives CVC investments? An Empirical Test of Social Network Theory Predictions," Economics Bulletin, AccessEcon, vol. 37(3), pages 2030-2040.
    • Handle: RePEc:ebl:ecbull:eb-16-00421
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    More about this item

    Keywords

    corporate venture capital; social network theory; financing; syndication;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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