CVC: current trends and future directions
ABSTRACT
Corporate Venture Capital (CVC) investments consist of minority equity stakes in
relatively new, not publicly traded companies that are seeking capital to continue
operation. Corporate Venture Capital (CVC) has been recognized as important vehicle
for fostering entrepreneurial development. Although there exists already an amount of
theoretical as well as empirical studies aiming at explaining, predicting or
understanding CVC activity in firms growth, there seems to be a growing dissatisfaction
among scholars with the fragmented findings that have emerged to date. In fact CVC
activities play an increasingly important role in value creation for both start-ups and the
large companies that invest in them, but it remains unclear how both corporate venturers
and start-up recipients capture and measure the strategic value of corporate venture
capital investments. The current paper intends to present a review of the existing
literature. Results present a fragmented literature with a proliferation of different
perspectives.
Keywords: CVC, entrepreneurial development, organizational performance
INTRODUCTION
Scholars have long been interested in the components and forms of the ‘knowledge
production function’—the process by which innovative inputs are transformed into
innovative outputs (Dushnitsky and Lenox, 2005). In the past, the innovation literature
has mainly focused on the role of internal R&D on firm innovation (Griliches, 1979),
even though internal R&D expenditures play only a limited role in firm innovation
rates. Actually, companies pursue innovation mainly by investing in external
entrepreneurial ventures. This phenomenon is generally referred to as Corporate
Venture Capital (also known as CVC). It represents an equity investment by large
corporations in entrepreneurial ventures that originate outside the corporation (Roberts
and Berry, 1985).
CVC activities have been playing an increasingly important role in innovation strategy
for large corporations across the globe. Figures about recent trends within the venture
capital industry point to that, after a period of decline at the end of the dotcom boom
between 2000 and 2003, corporations are now responsible for a significant share of
venture capital investments. By way of example, in 2009, around 20 per cent of the
Fortune 500 companies created a CVC unit (Dushnitsky, 2011). It is therefore not
surprising that today CVC is increasingly regarded by organizations as a vital weapon in
their entrepreneurial and innovation armory.
CVC has significantly evolved over time. As Chesbrough (2000: 32) contends, ‘the
most recent cycle of corporate venturing has utilized venture capital structures to
motivate employees to become more entrepreneurial and take more risk’. CVC
programs can create value for both start-ups and the large companies that invest in
them. Corporate Venture Capitalist can allow access to complementary technologies
and a general window on technology developments (Fox 2003; Gompers 2002). Startups benefit from, for instance, increased access to markets and customers as well as
management advice (McNally 1997; Muller et al., 2004). However, it remains unclear
how both corporate venture capitalists and start-up recipients capture and measure the
strategic value of corporate venture capital investments (Allen and Hevert 2007).
The heterogeneity of CVC investments and the variety of motives pushing companies to
pursue them makes it relevant to understand more in depth how CVC works and
performs. This is the aim of the paper, to provide an assessment of the current state of
the literature on CVC, and identify issues that deserve further attention. To achieve this
aim we review the existing literature on CVC in an attempt to systematize current
research and identify future avenues of investigation.
This paper is organized as follows. In the next section we describe the method for the
study. We then present findings. The paper ends with discussing what our findings
mean for the community of scholars.
METHOD FOR THE REVIEW
To address our research question, we carry out a literature review. Our review is
systematic in nature and narrative in terms of presentation of findings (see also Meglio
& Risberg, 2011 for a detailed protocol for a review). Below we describe the protocol
we followed in drawing our sample and classifying articles included in the sample.
To identify articles for the review, we searched into EBSCO source complete database.
The keyword for the search was Corporate Venture Capital. We delimited our search to
the time frame2000-2012, as the number of CVC investments in high-tech industries
has been growing dramatically since the beginning of 1990s. We decided to look in to
top-tier management journals as well as those focused on knowledge-related topics
(Linton, 2006), accounting for both American and European perspectives. We therefore
focused on the following journals: Academy of Management Journal, Business Strategy
Review, California Management Journal, Entrepreneurship Theory & Practice,
International Studies of Management and Organization, Journal of Management
Studies, Journal of Small Business Management, Organization Science, R&D
Management, Research Technology Management, Strategic Management Journal.
We narrowed our sample by excluding those articles not explicitly addressing CVC
issues. Moreover, we left out theoretical article. The final sample comprises 26 articles,
each of them featuring an empirical study (Table 1).
Table1. Composition of the Sample
Journal
Academy of Management Journal
Business Strategy Review
California Management Review
Entrepreneurship Theory & Practice
International Studies of Management
Organization
Journal of Management Studies
Journal of Small Business Management
R&D Management
Research Technology Management
Strategic Management Journal
TOTAL
and
2000-2009
2
1
2
-
2010-2012
2
1
1
3
1
2
3
3
17
3
2
9
From the table, it clearly emerges that CVC is a topic that attracts interest from different
readerships, within journals with different aims and scopes. Specifically, it interests
both more generalist journals, such as Academy of Management Journal, and focused
ones, such as Research Technology Management.
From each article, we collected information according to a reading note, organized
around different sections. Besides identification information (author, outlet, year of
publication), we wrote down the research questions authors investigate. In describing
the CVC under analysis, we classified CVC operations in terms of aims, units of
analysis, countries and time span. In the research method section, we categorized
studies as quantitative, qualitative or mixed and as relying on secondary and/or primary
data. In addition, we noted the theoretical frameworks employed and summarized main
findings.
FINDINGS
Our paper focuses on CVC activity, a corporate activity particularly relevant in hightech industries. Gompers and Lerner (2000) define CVC investments like established
industry incumbents’ participation in the private equity market by providing start-ups
with funding in return for equity positions (Gompers and Lerner, 2000). Although all
CVC investments have financial motivations (Chesbrough, 2002), learning and the
gathering of market and technology intelligence are generally recognized as being
among the most important objectives of this investment activity (Dushnitsky and Lenox,
2005; Wadhwa and Kotha, 2006), particularly in technology-intensive industries.
Main attention in these articles are high tech firms (ICT, telecommunication, computer
software, computer services), as they are active in venture capital operations aimed at
developing technological expertise.
As for the research focus, the elaboration of our data shows that literature proceeds from
three directions – financial performance of CVC; CVC as a path to develop new
technology; and CVC impact on new organization (Table 2).
Table2. Research Focus in CVC Research
Finance
Management
innovation
of
knowledge
Allen and Hevert (2007); Benson and
Ziedonis (2009); Dushnitsky and Lenox
(2006); Park and Steensma (2012); Gaba
and Meyer (2008)
and Wadhwa and Kotha (2006); Dushnitsky
and Lenox (2005); Keil (2002); Keil
(2004); Schildt, Maula and Keil (2005);
Keil, Autio and George (2008); Markman
et al. (2008); Dushnitsky and Shaver
(2009); Dushnitsky and Shapira (2010);
Gaba and Meyer (2008); Souitaris et al.
(2012); Dokko and Gaba (2012); Weber
and Weber (2010)
Strategy and organization
Sykes
(1990);
Ernst,
Witt
and
Brachtendorf (2005); Engel (2011); Napp
and Minshall (2011); Waites and Dies
(2006); Chesbrough and Socolof (2000)
Looking into the geographical areas covered by empirical research, our paper shows
that the number of CVC studies on countries other than the US is small but appears to
be growing. Specifically, the majority of the articles are focused on US and Canada
(21), with the remaining studies investigating Europe (three) and Asia (two).
The acquisition of innovation and knowledge is one of the most important result of a
CVC activity. Knowledge accumulation and transfer may be critical for the successful
operation of the CVC. For these reasons most of the papers typically focus on the CVC
programs (Table 3). Knowledge accumulates either through practice or by observing
and analyzing competitors’ venturing activities. In doing so, the corporation learns how
to organize its CVC program effectively, possibly promoting learning. However the
literature analysis shows that a not systematic effort has been devoted to conceptualize
and capture this learning.
The “Parent” organization was another important unit of analysis. Studies conducted on
"parent-venture relation" typically investigate specific ventures. These studies often
examine the intensity of a company’s CV activities, counting the number of CV units
created by a corporation.
Researchers have also invoked numerous theories, discussing their theoretical
preferences and the research questions pursued. An analyses into the theories used in
prior studies suggests that no single, dominant theoretical approach seems to have
guided past empirical analyses (Narayan et al., 2009).
Table 3. Level of analysis employed in the CVC literature
Relation between parent and venture
Chesbrough and
Socolof
(2000);
Chesbrough (2000); Ernst, Witt and
Brachtendorf (2005); Waites and Dies
(2006); Dushnitsky and Lenox (2006);
Program
Keil et al. 2008; Keil Weber and Weber
(2010);
Dushnitsky and Lenox (2005); Wadhwa
and Kotha (2006); Gaba and Meyer
(2008); Keil et al. (2008); Dushnitsky and
Shapira (2010); Dushnitsky and Shaver
(2009); Napp and Minshall (2011); Dokko
and Gaba (2012); Park and Steensma
(2012); Souitaris et al. (2012)
In the sample of articles, a branch of studies focus attention on financial aspect of CVC
activity. Allen and Hevert (2007) develop a paper on financial returns and strategic
benefits of Venture Capital investments in information technology companies. They
evaluate direct returns of programs of U.S. IT companies during 1990–2002 concluding
that ‘Direct gains (losses) were widely dispersed and bi modally distributed, based on
IRR and net cash flow metrics. Timing of initiation within the venture capital cycle;
program scale; and annual investment, write-down, and harvest behavior were
associated with differences in returns’ (Allen and Hevert, 2007: 262).
Another important study is the one conducted by Benson and Ziedonis (2009). They
build on previous studies that suggest that information gained through CVC-related
activities can improve the internal R&D productivity of established firms,
and
investigate an alternative means by which information gained through CVC investing
could improve firm performance—by increasing the returns to corporate investors when
acquiring startups. They conduct an event study of the returns to 34 corporate investors
from acquiring 242 technology startups. Results confirm predictions drawn from the
absorptive capacity literature and point to that the effect of CVC investing on
acquisition performance hinges critically on the strength of the acquirer’s internal
knowledge base.
‘CVC investments increase relative to an acquirer’s total R&D
expenditures, acquisition performance improves at a diminishing rate. We also find that
firms consistently engaged in venture financing earn greater returns when acquiring
startups than do firms with more sporadic patterns of investing, even controlling for
firm profitability, size, and acquisition experience’ (Benson and Ziedonis, 2009: 329).
Dushnitsky and Lenox (2006) develop a paper using a panel of CVC investments.
Scholars suggest that established firms face underlying challenges when investing CVC.
Namely, structural deficiencies inherent in corporate venture capital may inhibit
financial gains, but they find ‘that corporate venture capital investment will create
greater firm value when firms explicitly pursue corporate venture capital to harness
novel technology’ (Dushnitsky and Lenox, 2006: 753).
Park and Steensma (2012) address the question ‘When does Corporate Venture Capital
Add Value for New Ventures?’ , and explore conditions under which CVC funding is
beneficial to new ventures. They use a sample of 198 wireless communications service,
111 computer hardware, and 199 semiconductor 3111//3112) ventures founded in the
United States that received their first round of funding from CVC and/or IVC funds
between 1990 and 2003. They results show that CVC activities became prevalent after
1990 (Gaba and Meyer, 2008). This research shows that CVC funding presents both
advantages and disadvantages for new ventures. Authors explored conditions under
which CVC funding may be particularly beneficial to new ventures’ performance. They
conclude that‘the tight relationship between new ventures and corporate investors is
particularly beneficial in attaining specialized complementary assets. Such equity
relationships can mitigate potential opportunistic behavior between new ventures and
the providers of specialized complementary assets. It appears that when new ventures
require specialized complementary assets, the benefits of corporate investor ties
outweigh the ability to access the open market. In contrast, we found that the benefits of
CVC funding to new venture performance was relatively limited for those new ventures
that merely required generic complementary assets, and the benefits of an equity tie
with a corporate investor were minimal is such situations’ (Park and Steensma, 2012:
17).
A second branch of studies focus on management of innovation (learning and the
gathering of market and technology intelligence. Wadhwa and Kotha (2006), using
longitudinal data on 36 firms in the telecommunications equipment manufacturing
industry during the period 1989–99, investigate the conditions under which CVC
investments affect knowledge creation for corporate investors. Results indicate that
there is an optimum point beyond which the contribution of CVC investments to
investor knowledge creation declines. Results also suggest that when a corporate
investor is highly involved with portfolio firms, it may be possible to reverse this
decline. They contend that ‘greater involvement with portfolio firms has a positive
effect on the inverted U-shaped relationship between corporate venture capital
investment and investors’ knowledge creation. No such effect was found for investors’
technological knowledge diversity’ (Wadhwa and Kotha, 2006: 820).
Dushnitsky and Lenox (2005) find that firms realize ‘corporate venture capital’
activities in industries with weak intellectual property protection and, to some extent, in
industries with high technological ferment and where complementary distribution
capability is important. They find that firm’s cash flow combined with absorptive
capacity makes the investment e likely (Dushnitsky and Lenox, 2005).
As innovative start-ups often operate in domains of emergent industry practice, CVC
investment provides a valuable mechanism through which incumbents can develop
cognizance of future capability needs (Keil, 2002). Keil (2004) studies the important
role that initial conditions and knowledge management practices play in determining the
direction and effectiveness of specific learning processes that lead to an external
corporate venturing capability. He aims to answer two questions. Specifically,:
‘Through what processes do firms develop new competencies? What factors govern
processes of competence development?’. In his study he develops a model that explains
the learning processes through which firms develop an external corporate venturing
capability. This model describes how firms develop a capability to create and develop
ventures through corporate venture capital, alliances, and acquisition. In his model,
external corporate venturing capability is the outcome of learning processes.
Specifically, he finds out forms of learning-by-doing (Levitt and March, 1988) and
experiential learning (Huber, 1991) as well. However, the organization also learns
outside such external corporate venturing relationships by relying, for instance, on new
employees or consultants (Keil, 2004).
In addition, Schildt, Maula and Keil (2005) compare different forms of external
corporate venturing, namely corporate venture capital investments, alliances, joint
ventures, and acquisitions, as alternative means for inter-organizational learning. They
examine the antecedents of explorative and exploitative learning of technological
knowledge from external corporate ventures. Their empirical analysis is based on 110
largest public U.S. corporations operating in four sectors of ICT industries. They find
that technological relatedness and downstream vertical relatedness together decrease the
likelihood of explorative learning. This implies that companies aimed at enhancing their
explorative learning need to seek partners with dissimilar technologies and beyond their
customers. Contrary to their expectations, empirical results do not support any kind of
relationship between industry relatedness and explorative learning (Schildt, Maula and
Keil, 2005).
Keil, Autio and George (2008) examine how firms engender cognizance of their future
capability needs in situations characterized by high decision-making uncertainty. They
develop a theoretical account of how firms use investments in start-ups to actively
engage in experimentation outside organizational boundaries, a learning process which
we term as disembodied experimentation. Disembodied experimentation, they argue, is
a form of experimental learning whose aim is to understand action-outcome
relationships (Keil, Autio and George, 2008). They find two factors influencing the
relationship between disembodied experimentation and capability building decisions: a
knowledge-brokering role or strategy seems to be a critical positive moderator of the
likelihood of internalization,… Second, simultaneous changes in technology and
business models
determine adaptation complexity that reduces the likelihood of
disembodied experimentation affecting capability building decisions (Keil, Autio and
George, 2008).
Another branch of studies analyze aspect linked on strategy and organization. Keil and
colleagues (2008) examine how different governance modes for external business
development activities and venture relatedness affect a firm’s innovative performance.
Based on idea that interorganizational relationships enhance the innovative performance
of firm, they analyze a panel of the largest firms in four ICT sectors. Results extend past
studies by examining how the relationship between various external business
development activities and innovative performance depends on venture relatedness.
Specifically, their study shows that alliances, joint ventures, and CVC investments in
related industries
have a significantly positive correlation
with innovative
performance>> (Keil et al., 2008).
Markman et al. (2008) analyze organizational interactions involving universities and
firms that result in the commercialization of research and technology. They develop a
taxonomy of modes of commercialization that builds on internal approaches, quasiinternal approaches (e.g. incubators), university research parks, regional clusters,
academic spin-offs and start-ups, licensing, contract research and consultancy, corporate
venture capital, and open science and innovation (Markman et al., 2008).
Dushnitsky and Shaver (2009) analyze limitations to interorganizational knowledge
acquisition. They study a panel of 1,646 start-up-stage ventures that received funding
during the 1990s. they find that under a regime of weak intellectual property protection
(IPP), an entrepreneur-CVC investment relationship is less likely to form when the
entrepreneurial invention targets the same industry as corporate products. In contrast,
under a strong IPP regime, industry overlap is associated with an increase in the
likelihood of an investment relationship. For these reason they conclude that ‘CVC has
a greater capability and inclination to target an entrepreneurial venture that overlaps
with parent-corporation’s industry, compared to a venture that does not operate in
parent-corporation’s industry’ (Dushnitsky and Shaver 2009: 1050).
Dushnitsky and Shapira (2010) focus their attention on investment practices and
performance of corporate and independent venture capitalists. The paper investigates
the three elements of the principal-agent framework, thus providing direct evidence that
compensation schemes (incentives) shape investment practices (managerial action), and
ultimately investors’ outcome (performance). They observe a performance gap between
corporate investors and their independent counterparts. This gap is sensitive to CVC’s
compensation system irrespective of whether the gap is positive or negative. ‘In other
words, the ‘compensation effect’ may manifest itself in the form of increasing a positive
performance differential—as we find—or as reducing a negative gap’ (Dushnitsky and
Shapira 2010: 1011). Moreover, the scholars study the association between incentives
and performance and they show a direct relationship between incentives and the actions
managers undertake. <<They argue that there exists a ‘disparity between the number of
participants in venture capital syndicates that involve a corporate investor, and those
that consist solely of IVCs. The disparity shrinks substantially, however, for a subset of
CVCs that compensate their personnel using performance pay. We find a parallel
pattern when analyzing the relationship between compensation and another investment
practice, staging of investment’ (Dushnitsky and Shapira 2010: 990).
Gaba and Meyer (2008) propose and test a mid-range theory explaining the incursion of
venture capital practices into the Information Technology sector of the U.S. economy,
and their subsequent diffusion in the form of corporate venture capital programs. They
analyze the contagion processes whereby practices originating in one organizational
population spread into and diffuse within a second. Their argued that:
‘endemic
innovations spread into adjacent organizational populations through two different forms
of contagion. The first, cross-population contagion, flows through close interpersonal
relations that afford direct exposure to the innovation, observation of its tangible
payoffs, and inductive learning of its innovative practices… We further theorized that a
second set of diffusion mechanisms starts to operate once an endemic innovation takes
root in the new setting. Contagion within the new population begins, supplementing
without necessarily supplanting the initial cross population contagion process’ (Gaba
and Meyer, 2008: 994).
Through a study of six corporate venture capital programs, Souitaris et al. (2012)
explain how new organizational units resolve competing forces from two different
institutional environments. They develop an inductive, qualitative study that started as
an investigation of CVC practices. Their study aims to explore how CVCs organize
their investment activities, the conditions explaining the variance in the organizational
structures of CVC units and How new organizational subunits resolve competing forces
from different institutional environments (Souitaris et al., 2012: 480). Authors’
conclusion are that In the context of CVCs, there exists a dichotomy between organic
and mechanistic structures. Findings show that it is the environment with which the
subunits align to determine the adopted system of practices. Specifically CVC units
aligning with their parent (exhibiting endo-isomorphism) appear more likely to adopt a
mechanistic structure. Instead, units aligning with VCs (exhibiting exo-isomorphism)
appear more likely to adopt an organic structure (Souitaris et al., 2012:).
In another important article, Dokko and Gaba (2012) examine career experiences of
CVC managers and practice variation. Authors sustain that when organizations adopt
new practices, the practices are often modified to fit the new context. They argue that
managers who implement new practices modify them, and that the extent of practice
variation is determined by the experience with the practice itself and
a form of
experience that enables assessment of the fit between the practice and the adopting
firm>> (Dokko and Gaba, 2012: 563). The primary objective of this study was to
investigate the effect of individuals’ career experiences on the extent of practice
variation. Authors tested this arguments by observing a sample of 93 IT firms with CVC
units. IT firms are regarded as
an appropriate sample for testing our hypotheses,
because firms in the IT sector account for
more than three-quarters of all CVC
investments in the 1990s (Gaba & Meyer, 2008). Moreover, focusing on IT firms
exclusively allow them to control for unobserved heterogeneity at the industry level
(Dokko and Gaba, 2012: 569). They develop a theoretical framework that specifies
practice-specific and fit-specific prior career experiences of implementing managers as
predictors of how much practices will vary after adoption (Dokko and Gaba, 2012:
577). They conceptualize
‘the extent of practice variation in terms of both goal
orientation and operational strategies of practices. Drawing on organizational learning
theory, we argued that different types of career experiences confer specific knowledge
and mental models that in turn influence practice variation. Practice-specific experience
leads to a more faithful replication of an adopted practice, while fit-specific experience
enables assessment of fit between the practice and the adopter, leading to greater
modification of the adopted practice’ (Dokko and Gaba, 2012: 578).
In this branch is possible to consider an article of Weber and Weber (2010). They carry
out an explorative study of CVC activity with a specific focus on social capital and
knowledge relatedness as promoters of organizational performance. They combine
social capital theory with the knowledge-based view of the firm and thereby
demonstrate the interrelatedness and combined importance of the two concepts. Their
proposed model show that social capital and knowledge relatedness, together referred to
as “relational fit,” facilitate knowledge transfer and creation, which in turn positively
influence organizational performance. Their model analyzes the influence of relational
fit on German corporate venture capital units (CVCs) and their portfolio companies.
Findings show that relational fit facilitates knowledge transfer and creation, and this in
turn positively influences organizational performance (but CVC/corporate performance
only to a limited extent) (Weber and Weber, 2010).
Other studies focalize attention on CVC as a strategy for external innovation (e.g. Ernst,
Witt and Brachtendorf, 2005). They investigate 21 corporate venture capital (CVC)
units of large corporations in Germany and if the respective CVC programs pursue the
strategic objective to leverage external innovation and if these programs are managed
accordingly. They found that the majority of German corporate venture programs follow
mixed objectives and are not organised and managed as suggested in the literature. They
conclude that a short term focus on financial objectives of these CVC programs
prohibits the achievement of long-term strategic benefits from external innovation.
Actually, CVC programs seem to be too dependent on the corporate mothers. This is
especially true for CVCCs that receive their funds in the form of an yearly budget with
no assurance that they will continue to exist next year (Ernst, Witt and Brachtendorf,
2005: 241).
Another important article in this branch is the Engel’s one (2011). The author
investigates identifies ten leading strategies employed by venture capitalists and
entrepreneurs to test new ideas and commercialize innovations quickly. They are: Invest
in Teams, Invest in Markets, Eliminate Pain, Focus On Customer Development, Not
Product Development, Dedicate Resources in Stages, Fail Fast, Speed is Everything,
Pour It On, Offer No Lifeboats, Be Always Selling But Never For Sale. In the
discussion section, Engel identifies three broad issues deserving further attention.
Specifically,
‘1. The most disruptive innovations are not technical or product innovations alone.
Rather, they are a combination of technical and business model innovations;
2. Many of the inputs of innovation management in the venture capital model rely on a
market orientation and rapid-cycle innovations managed by superior teams;
3. The venture capital model provides a garden of opportunity for partnerships,
collaborations, and acquisitions. A Chief Technology Officier who is conversant with
the venture model can be a powerful force in attracting the right opportunities to the
enterprise’ (Engel, 2011: 42-43).
Another important contribution is developed by Napp and Minshall (2011). They
present a paper based on nine in-depth case studies that analyze how to Successfully
implement a corporate venturing program and the challenges, CV Capitalists need to
face, from setting the right mixture of strategic goals and operational implementation to
measuring outcomes and capturing value. Their findings support the idea that
‘successful CVC programs clearly define objectives, roles, and responsibilities and
involve a wide range of business functions across hierarchies and business units in the
corporate venturing process. Maximizing exposure of the company to venturing
activities helps the company to capture the full strategic value of these companies, while
clear communication of objectives and responsibilities makes the venturing effort more
targeted and thus more likely to succeed’ (Napp and Minshall, 2011: 35-36).
The relationship between Hewleett-Pakard (HP) and a leading VC firm is analyzed by
Waites and Dies (2006). Authors study the strategic relationship between HewlettPackard Labs and the venture capital firm Foundation Capital. This relationship is built
around the unique needs of a large corporate research organization, and is not intended
to replace or substitute for on-going relationships between HP's business organizations
and the venture capital community. ‘The relationship has enabled both firms to
understand more clearly the fundamental differences in their two different innovation
models, and it is suggested that other large central research labs could benefit from a
similar relationship. HP Labs, for instance, has become more selective about
investments in promising new technologies, and has been able to propose more focused
market entry strategies for several of its new technologies. There are also ways to
achieve such benefits without actually establishing a formal relationship’ (Waites and
Dies, 2006: 20).
How can a technology-savvy company better leverage the innovative ideas coming out
of its laboratories? Chesbrough and Socolof (2000) analyze Lucent Technologies’ New
Ventures Group and show how Lucent blends venture capital and internal development
models to speed the transition from the lab to the market. Lucent Technologies have
been considering the use of CVC from 1996 for three reasons: 1. to uncover new
vehicles for increasing its growth; 2. to develop new mechanisms for leveraging its
unparalleled technology base across multiple new business opportunities; 3. to increase
the rate at which it commercializes its technologies, and it requires a catalyst to move
technology out of the lab and into the market more rapidly. After a deep analysis of
Lucent’s activities, Chesbrough and Socolof underline both the challenges and the
opportunities of using Venture Capital model for these purposes. They claim that ‘the
challenge is to balance the forces of the venture capital model with those of an internal
corporate development model. The New Ventures Group's experience to date suggests
that balancing these forces is difficult but that there are rewards to the organization for
doing so. These include the discovery of new sources of growth, the ability to leverage
internal technology across multiple businesses, and the ability to stimulate cultural
change within the organization’ (Chesbrough and Socolof, 2000: 13)
CONCLUSIONS
Over the past twelve years, empirical studies have examined the CVC phenomenon.
These studies have been conducted in some different national contexts. Particularly
researchers have focused on the innovation impact of these activities, while continuing
to examine its financial contribution. Instead for some scholars CVC is viewed as an
important element of corporate strategy, not a mere investment opportunity.
For these reasons the literature is not always as clear as it would be desirable in defining
the relevant unit of analysis and this often makes comparisons across studies very
difficult.
In fact, findings present a fragmented state of affair with a proliferation of different
perspectives. This result suggests that this topic deserves further attention and is a fertile
ground of investigation. Results provide evidence that a serious reflection on is needed.
But this is a partial explanation for inconsistent and contradictory findings about this
phenomenon. In fact, this analysis can be extended and improved in several ways. Two
first options is to enlarge the scope and the times pan of the review, and/or to selected
other specific journals.
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