Corporate venture capital portfolios and firm innovation

Corporate venture capital (CVC) investments and technological performance: Geographic diversity and the interplay with technology alliances

“…Distant search among disparate partners requires more efforts in the recognition and integration of relevant knowledge (Fleming, 2001) because differences in the nationality and culture of partners can be a source of potential distrust and conflict (Hamel et al, 1989;Parkhe, 1993). Therefore, effective identification and assimilation of knowledge from partners requires relationship-specific investments (Dyer and Singh, 1998;Rosenkopf and Nerkar, 2001;Wadhwa et al, 2015). There may be limited scope economies if firms are unable to redeploy their expertise in identifying and integrating knowledge across ventures operating in different environments (Yang et al, 2014).…”

“…The associated complexity exerts significant pressures on managers' scarce cognitive abilities and the firms' limited resources, thereby impairing the ability to observe, transfer, coordinate, integrate and recombine relevant external knowledge (Wadhwa, Phelps and Kotha, 2015;Phene et al, 2006). Hence, the inverted-U shaped relationship between CVC geographic diversity and technological performance is expected to show a flatter curvature and an earlier turn into a downward slope.…”

“…The data construction exercise provided us with a balanced panel data set of firms' technological performance, R&D, and alliance and CVC activities for the years 1998-2007. Given that the technology alliance and CVC variables are measured in terms of portfolios over the past 3 years, the panel for estimation is restricted to [2001][2002][2003][2004][2005][2006][2007] (Dushnitsky and Lenox, 2005;Wadhwa and Kotha, 2006;Sampson, 2007;Keil et al, 2008;Wadhwa et al, 2015), we use the number of patents of the firm in a year as our technological performance measure. There are numerous advantages of using patent counts as measures of technological activities (Basberg, 1987;Griliches, 1990).…”

“…Since CVC investments have been found to affect innovativeness for about three to four years following the investment activity (Dushnitsky and Lenox, 2005;Wadhwa et al, 2015), we relate technological performance to CVC investments and their characteristics during the prior three years. In this respect, we follow the standard approach taken in the alliance literature (e.g.…”

“…However, extant studies on knowledge-sourcing and firm performance, while recognizing that CVC investments are often used as technology-sourcing instruments in conjunction with other external knowledge-sourcing strategies, have juxtaposed the various sourcing strategies without considering the potential synergetic or detrimental effects that their joint engagement could bring about (e.g., Keil et al, 2008;Rothaermel and Hess, 2007;van de Vrande et al, 2011;Wadhwa and Kotha, 2006;Wadhwa et al, 2015). In this study, we take a portfolio perspective of CVC investments, following recent contributions to the CVC literature (Yang, Narayanan and De Carolis, 2014;Wadhwa et al, 2015;Matusik and Fitza, 2012), and extend this perspective to focus on firms' broader knowledge exploration portfolio consisting also of technology alliances.…”