Corporate Venture Capital and the Boundaries of the Firm

62 Pages Posted: 23 Mar 2018 Last revised: 1 Mar 2019

See all articles by Hongyu Shan

Hongyu Shan

Fordham University - Finance Area

Date Written: January 1, 2019

Abstract

This study examines the strategic overlap between a Corporate Venture Capital (CVC) investor and an entrepreneurial firm in the product, market, and technology spaces. Using this measure, I explore an incumbent’s decision to invest into, versus acquire, a startup in a comparative setting. I show that CVC’s distinct features regarding property rights and information acquisition are preferred when the strategic overlap is low. Consistent with the property rights and option-like features of VC contracts, this link between strategic overlap and firm boundary decision is stronger when industry competition is low and startup maturity is high.

Keywords: corporate venture capital, entrepreneurial finance, boundaries of the firm, machine learning, strategic investments, acquisition

JEL Classification: G24, G34, L26

Suggested Citation

Shan, Hongyu, Corporate Venture Capital and the Boundaries of the Firm (January 1, 2019). 2nd Emerging Trends in Entrepreneurial Finance Conference, 29th Annual Conference on Financial Economics & Accounting 2018, Available at SSRN: https://ssrn.com/abstract=3145341 or http://dx.doi.org/10.2139/ssrn.3145341

Hongyu Shan (Contact Author)

Fordham University - Finance Area ( email )

33 West 60th Street
New York, NY 10023
United States

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