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Corporate venture capital and the nature of innovation

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  • Hannes Maxin

Abstract

This paper investigates a model where two corporate venture capital firms (CVCs) decide whether to finance a new venture stand-alone or together, called syndication. The CVCs obtain a cash flow if the venture succeeds. In addition, the venture has a positive or negative effect on an asset (e.g. a product or a process) of the CVCs parental companies. This effect may differ among the parental companies. I show that the CVC faced with the weaker positive effect becomes the stand-alone investor only if the cash flow is low. Otherwise, in equilibrium, there are only syndicates or stand-alone investments of the CVC with the stronger positive effect. However, if one CVC faces a positive effect on its parental company's asset whereby the opponent faces a negative effect, then a syndicate is still possible. The model generates empirical predictions for syndicates consisting of several CVCs.

Suggested Citation

  • Hannes Maxin, 2020. "Corporate venture capital and the nature of innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 29(1), pages 1-30, January.
    • Handle: RePEc:taf:ecinnt:v:29:y:2020:i:1:p:1-30
    DOI: 10.1080/10438599.2019.1571673
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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