TY - JOUR

T1 - Corporate venture capital and the nature of innovation

AU - Maxin, Hannes

N1 - Funding information: I would like to thank my advisor Heidrun C. Hoppe-Wewetzer and an anonymous referee for very helpful comments and suggestions. The paper has also benefited from the comments of Herbert Dawid, Götz Georg, Georg Gebhardt, Thomas Hellmann, Sebastian Kranz, Armin Schwienbacher and numerous discussions with participants of the Verein für Socialpolitik-Jahrestagung 2017 and the seminars of Leibniz University of Hannover and University of Ulm.

PY - 2019/2/6

Y1 - 2019/2/6

N2 - 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.

AB - 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.

KW - Corporate venture capital

KW - nature of innovation

KW - nonmonetary support

KW - syndication

KW - venture capital

UR - http://www.scopus.com/inward/record.url?scp=85061303677&partnerID=8YFLogxK

U2 - 10.1080/10438599.2019.1571673

DO - 10.1080/10438599.2019.1571673

M3 - Article

AN - SCOPUS:85061303677

VL - 29

SP - 1

EP - 30

JO - Economics of Innovation and New Technology

JF - Economics of Innovation and New Technology

SN - 1043-8599

IS - 1

ER -