This dissertation investigates whether staged investment of corporate venture capital has an influence on the technological innovation performance. Corporate venture capital (CVC) is a firm that invests small equity stakes in innovative start-up firms in the hope of grasping future growth opportunit...
This dissertation investigates whether staged investment of corporate venture capital has an influence on the technological innovation performance. Corporate venture capital (CVC) is a firm that invests small equity stakes in innovative start-up firms in the hope of grasping future growth opportunities. Being oriented toward the initial stages of technological development, CVC investment is an attractive method of boarding technology portfolios while allowing investing firms to identify early technological and commercial opportunities. This potential leads to large global companies including Google, Intel, and General Electric becoming attracted to engaging CVC investment for technology developments because CVC outperforms when tracking disruptive or threatening technology, entering new markets, or fostering strong alliances with customers or suppliers.
CVC investment has been rapidly growing recently because R&D alone has limited ability to build an adequate portfolio of capabilities and technologies. In dynamic environments in which technologies quickly become obsolete, CVC maintains options for understanding external technology. Spreading investment within multiple ventures allows firms to reduce the overall risk associated with their quests for new technology. Once the technology in which CVC has invested becomes promising, more substantial follow-up investments can take the form of strategic alliances between venture and investment company business units; this may lead to the corporate investor acquiring the start-up.
Although various theoretical models have been developed to account for the advantages of CVC staged investment, empirical studies in the aspect of CVC portfolios are relatively sparse. The stages of investment are categorized from “start-up/seed”, “early”, and “expansion”, to “later” stage. The investment stage composition in a portfolio is highly correlated with the growth potential and downside risk of the portfolio, which in turn influences an investor’s innovation performance. Here, research investigating how the portfolio development stage can influence corporate investors’ innovation is highly required to further study.
For studies, we used negative binomial panel regression with 21 years of deal data from 70 cases of CVC. Since the interest is in the effect of firm innovative performance in a portfolio of investment staged, the analysis is confined to firms that have internal CVC firms such as Google Ventures, Intel Capital and Dupont Ventures.
This dissertation consists of four studies: (1) examining the effect of investment aggressiveness of a firm's portfolio on a corporate investor’s innovation performance, (2) examining the effect of investment safety of a firm's portfolio on a corporate investor’s innovation performance, (3) examining the moderating effect of within portfolio's industry diversity between investment aggressiveness/safety and innovation performance, and (4) examining the moderating effect of external partnership between investment aggressiveness/safety and innovation performance.
In the first study, we found that the investment aggressiveness of a firm’s portfolio, the degree of fund investments at the initial development stage, has an inverted U shaped relationship with a corporate investor’s innovation performance. This means that the more seed or early stage investment within the investment portfolio, the higher the innovation performance; however, if the amount of seed or early stage investment is over a certain level, the performance decreases.
In the second study, we found that, similar to first study, the investment safety of a firm’s portfolio, the number of invested ventures at the initial development stage, has an inverted U shaped relationship with a corporate investor’s innovation performance. This means that too much investment on initial or late stage has bad effect on innovation performance by damaging investment safety on portfolio.
In the third study, we found that within portfolio's industry diversity has negative moderating effect between investment aggressiveness and investor's innovation performance. However, as different from we hypothesize, within portfolio's industry diversity's positive moderating effect between investment safety and innovation is not statistically significant. This means that industry diversity blocks knowledge exchange, facility sharing, or collaboration between ventures, so inverted U shaped relationship of first study alleviated
In the last study, we found that external partnering has negative moderating effect between investment aggressiveness and investor's innovation performance, as well as has positive moderating effect between investment safety and investor's innovation performance. This means that external partnering functions a supplementary for portfolio's technological performance because it migrates the uncertainty of seed of early stage ventures.
Consequently, this dissertation aims to examine whether the CVC staged investment leads to improved technological innovation performance. We theorize and examine how staged investment shapes portfolio configuration, how it leads to portfolio characteristics in terms of investment aggressiveness, investment safety, industry diversity, and external partnering, and then how this is related to technological innovation.
This research has contributed to extant research related to portfolio strategies for corporate investors to enhance technological innovation. The decision of the stages in which CVC or corporate has invested leads to completely different performance effects. This study can help investors manage their overall technology strategy in a manner such that it distributes the internal budget for technology development into each category with R&D, alliance, mergers and acquisition or CVC investment. As open innovation is a popular method of sourcing advanced and rapid technologies, CVCs have to carefully manage each investment deal, particularly in the development stages. Second, this study contributes to the innovation management literature and real options theory by emphasizing the importance of firms engaging in external technology sourcing at different stages of investment. Staged investment is a sparse research domain because both the theory and practical approach examine staged investment in terms of the alleviation of uncertainty rather than the maximization of technological performance. We found that the study of portfolio management across development stages heavily contributes to empirical research of innovation management.
This dissertation investigates whether staged investment of corporate venture capital has an influence on the technological innovation performance. Corporate venture capital (CVC) is a firm that invests small equity stakes in innovative start-up firms in the hope of grasping future growth opportunities. Being oriented toward the initial stages of technological development, CVC investment is an attractive method of boarding technology portfolios while allowing investing firms to identify early technological and commercial opportunities. This potential leads to large global companies including Google, Intel, and General Electric becoming attracted to engaging CVC investment for technology developments because CVC outperforms when tracking disruptive or threatening technology, entering new markets, or fostering strong alliances with customers or suppliers.
CVC investment has been rapidly growing recently because R&D alone has limited ability to build an adequate portfolio of capabilities and technologies. In dynamic environments in which technologies quickly become obsolete, CVC maintains options for understanding external technology. Spreading investment within multiple ventures allows firms to reduce the overall risk associated with their quests for new technology. Once the technology in which CVC has invested becomes promising, more substantial follow-up investments can take the form of strategic alliances between venture and investment company business units; this may lead to the corporate investor acquiring the start-up.
Although various theoretical models have been developed to account for the advantages of CVC staged investment, empirical studies in the aspect of CVC portfolios are relatively sparse. The stages of investment are categorized from “start-up/seed”, “early”, and “expansion”, to “later” stage. The investment stage composition in a portfolio is highly correlated with the growth potential and downside risk of the portfolio, which in turn influences an investor’s innovation performance. Here, research investigating how the portfolio development stage can influence corporate investors’ innovation is highly required to further study.
For studies, we used negative binomial panel regression with 21 years of deal data from 70 cases of CVC. Since the interest is in the effect of firm innovative performance in a portfolio of investment staged, the analysis is confined to firms that have internal CVC firms such as Google Ventures, Intel Capital and Dupont Ventures.
This dissertation consists of four studies: (1) examining the effect of investment aggressiveness of a firm's portfolio on a corporate investor’s innovation performance, (2) examining the effect of investment safety of a firm's portfolio on a corporate investor’s innovation performance, (3) examining the moderating effect of within portfolio's industry diversity between investment aggressiveness/safety and innovation performance, and (4) examining the moderating effect of external partnership between investment aggressiveness/safety and innovation performance.
In the first study, we found that the investment aggressiveness of a firm’s portfolio, the degree of fund investments at the initial development stage, has an inverted U shaped relationship with a corporate investor’s innovation performance. This means that the more seed or early stage investment within the investment portfolio, the higher the innovation performance; however, if the amount of seed or early stage investment is over a certain level, the performance decreases.
In the second study, we found that, similar to first study, the investment safety of a firm’s portfolio, the number of invested ventures at the initial development stage, has an inverted U shaped relationship with a corporate investor’s innovation performance. This means that too much investment on initial or late stage has bad effect on innovation performance by damaging investment safety on portfolio.
In the third study, we found that within portfolio's industry diversity has negative moderating effect between investment aggressiveness and investor's innovation performance. However, as different from we hypothesize, within portfolio's industry diversity's positive moderating effect between investment safety and innovation is not statistically significant. This means that industry diversity blocks knowledge exchange, facility sharing, or collaboration between ventures, so inverted U shaped relationship of first study alleviated
In the last study, we found that external partnering has negative moderating effect between investment aggressiveness and investor's innovation performance, as well as has positive moderating effect between investment safety and investor's innovation performance. This means that external partnering functions a supplementary for portfolio's technological performance because it migrates the uncertainty of seed of early stage ventures.
Consequently, this dissertation aims to examine whether the CVC staged investment leads to improved technological innovation performance. We theorize and examine how staged investment shapes portfolio configuration, how it leads to portfolio characteristics in terms of investment aggressiveness, investment safety, industry diversity, and external partnering, and then how this is related to technological innovation.
This research has contributed to extant research related to portfolio strategies for corporate investors to enhance technological innovation. The decision of the stages in which CVC or corporate has invested leads to completely different performance effects. This study can help investors manage their overall technology strategy in a manner such that it distributes the internal budget for technology development into each category with R&D, alliance, mergers and acquisition or CVC investment. As open innovation is a popular method of sourcing advanced and rapid technologies, CVCs have to carefully manage each investment deal, particularly in the development stages. Second, this study contributes to the innovation management literature and real options theory by emphasizing the importance of firms engaging in external technology sourcing at different stages of investment. Staged investment is a sparse research domain because both the theory and practical approach examine staged investment in terms of the alleviation of uncertainty rather than the maximization of technological performance. We found that the study of portfolio management across development stages heavily contributes to empirical research of innovation management.
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#기업벤처캐피탈 Corporate Venture Capital 포트폴리오 단계적 투자
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