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On the Strategic Use of Corporate Venture Financing for Securing Demand


  • 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)


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.

Suggested Citation

  • Yohanes E. Riyanto & Armin Schwienbacher, 2001. "On the Strategic Use of Corporate Venture Financing for Securing Demand," Departmental Working Papers wp0109, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0109

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    References listed on IDEAS

    1. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
    2. Steven J. Davis & Jack MacCrisken & Kevin M. Murphy, 2001. "Economic Perspectives on Software Design: PC Operating Systems and Platforms," NBER Working Papers 8411, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Andrea Schertler, 2005. "European venture capital markets: fund providers and investment characteristics," Applied Financial Economics, Taylor & Francis Journals, vol. 15(6), pages 367-380.

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