IDEAS home Printed from
   My bibliography  Save this paper

A Real Options View of Corporate Venture Capital Investment Decisions: An Empirical Examination


  • Li, Yong

    (U of Illinois at Urbana-Champaign)

  • Mahoney, Joseph T.

    (U of Illinois at Urbana-Champaign)


This paper joins the strategic management research literature with the entrepreneurial research literature by developing a real options framework to explain and predict corporate venture capital investment decisions. Corporate venture capital is viewed as containing a series of real options. The initial investment opportunity is analogous to a call option to invest. Upon exercising the call option, the investing firm acquires two additional real options: the abandonment option in adverse market conditions and growth options in favorable market conditions. This paper proposes that established firms' propensity to make corporate venture capital investments are influenced by the factors that determine the economic value of the real options embedded in corporate venture capital projects. These real options value drivers include uncertainty, usage flexibility, growth potential and competition. Using a large sample of corporate venture capital investments during 1980-2004, this paper finds strong empirical support for a real options view of corporate venture capital investments.

Suggested Citation

  • Li, Yong & Mahoney, Joseph T., 2006. "A Real Options View of Corporate Venture Capital Investment Decisions: An Empirical Examination," Working Papers 06-0108, University of Illinois at Urbana-Champaign, College of Business.
  • Handle: RePEc:ecl:illbus:06-0108

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Sonali K. Shah, 2006. "Motivation, Governance, and the Viability of Hybrid Forms in Open Source Software Development," Management Science, INFORMS, vol. 52(7), pages 1000-1014, July.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Lanfang Wang & Susheng Wang, 2009. "Convertibles and milestones in staged financing," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 33(2), pages 189-221, April.
    2. Lin, Shu-Jou & Lee, Ji-Ren, 2011. "Configuring a corporate venturing portfolio to create growth value: Within-portfolio diversity and strategic linkage," Journal of Business Venturing, Elsevier, vol. 26(4), pages 489-503, July.
    3. Basu, Sandip & Phelps, Corey & Kotha, Suresh, 2011. "Towards understanding who makes corporate venture capital investments and why," Journal of Business Venturing, Elsevier, vol. 26(2), pages 153-171, March.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecl:illbus:06-0108. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.