Tapping into the knowledge of incumbents: The role of corporate venture capital investments and inventor mobility

Abstract

Research Summary: This article investigates the impact of corporate venture capital (CVC) investments and inventors' mobility on the extent to which new ventures use incumbents' knowledge resources as inputs for their innovation activities. Our findings suggest that ventures receiving CVC investments draw less on investors' knowledge, while inventor mobility increases the extent to which an incumbent's technological knowledge is used by recipient ventures. Ventures combining CVC investments and inventor mobility from the same incumbent are selected for drawing less on that incumbent's patents, but these citation flows increase in the period after investment and the inventors' hiring events are combined. Our results, thus, unveil the organizational complexity associated with the individual and combined roles of CVC investments and inventor mobility in determining new ventures' innovation behaviors. Managerial Summary: New ventures often acquire resources from large established firms to foster development and success. Among others, research has primarily focused on equity investmentscorporate venture capital and the hiring of employees-in particular inventors. While prior work has studied the impact of these two resources in terms of success and performance, we look more specifically at whether these two particular resources, individually and combined, could function as channels through which new ventures can access and use established firms' knowledge assets. Our analyses suggest that ventures receiving CVC investments draw less on investors' knowledge, while those hiring inventors draw more. Ventures combining these resources show an increased use of the incumbent firm's knowledge assets in the period after investment and hiring are combined. K E Y W O R D S corporate venture capital, inventor mobility, knowledge flows, new ventures, patents

Functional Knowledge versus Strategic Knowledge: What Type of Knowledge Matters Most for the Long-Term Performance of Startups

“…The numerous studies on knowledge inheritance and knowledge spillover from incumbents typically illustrate the vehicles and mechanisms through which knowledge generated within established firms is transmitted and enables startups to exploit opportunities using the knowledge (Acs et al, 2013; Audretsch & Belitski, 2013; Di Lorenzo & van de Vrande, 2019; Feldman et al, 2019; Gambardella, Ganco, & Honoré, 2015). Some most frequently discussed mechanisms include entrepreneurs pursuing opportunities proximate to the businesses of their prior employers but not exploited by these incumbents yet (Klepper, 2001), startup founding team members and employees using their knowledge accumulated through experiential learning in their former organizations (Agarwal, Campbell, Franco, & Ganco, 2016), and startups seeking for knowledge from incumbent employees through social networks (Phillips, 2002).…”

“…Finally, industrial settings that have been introduced in prior studies are within a limited range of emerging high-tech industries or technologically complex industries, whereas traditional or technologically mature industries are largely missing from the discussion. The industries that have been given priority involve semiconductors (Adams et al, 2016; Di Lorenzo & van de Vrande, 2019; Klepper & Thompson, 2010), disk drives (Agarwal et al, 2004; Franco & Filson, 2006), biotech (Basu et al, 2015; Stuart & Sørensen, 2003), ICT (Lasch, Robert, & Le Roy, 2013), and automotive (Klepper, 2002), as well as knowledge-intensive service industries (Andersson et al, 2012; Agarwal et al, 2016; Chatterji, 2009; Wennberg et al, 2011). Only a few scholars perform analysis at a sectorally aggregated level without regard to specific industries (Dahl & Sorenson, 2013; Gambardella et al, 2015; Minola et al, 2021; Santarelli & Tran, 2012; Yeganegi et al, 2016).…”

Performance implications of corporate venture capital investments for entrepreneurial ventures: the differing moderating effects of R&D intensity before and after IPO

“…Although previous research has explored the impacts of CVC investment on entrepreneurial ventures' technological innovations (Chemmanur et al, 2014;Cirillo, 2019) and the influence of CVC investments on the part of incumbent companies (Keil et al, 2008a(Keil et al, , 2008bPark, 2017;Smith and Shah, 2013), the performance implications of CVC investments for entrepreneurial ventures are not well understood, despite the increasing prevalence of CVC financing for entrepreneurial ventures (Di Lorenzo and van de Vrande, 2019;Hill and Birkinshaw, 2014). For instance, Chemmanur et al (2014) find that CVC-backed ventures produce innovations more quickly and more frequently.…”

“…For entrepreneurial ventures, especially those pursuing novel technologies, corporate venture capital (CVC) financing is becoming an increasingly important option in that CVC investments are launched by large incumbent companies or what we call “corporate investors” (Chesbrough, 2002; Kim et al , 2021; Cabral et al , 2021) 1. In addition to gaining financial support, entrepreneurial ventures could accrue opportunities to tap advanced technologies, particularly when their technological realms overlap to some extent with those of corporate investors (Di Lorenzo and van de Vrande, 2019; Polidoro and Yang, 2021). Additionally, entrepreneurial ventures could gain market access and resource complementarities with the assistance of corporate investors (Asongu and Tchamyou, 2016; Titus et al , 2020; Dushnitsky and Lenox, 2006).…”

Media environment, venture capital, and technological innovation: Evidence from China

“…First, the extant literature offers inconsistent predictions regarding the relationship between venture capital (VC) and technological innovation (Alvarez‐Garrido & Dushnitsky, 2016; Lahr & Mina, 2016). Due to high dependence of technological innovation on capital, certain scholars have argued that the increase of VC will substantially promote technological innovation (di Lorenzo & van de Vrande, 2018). However, while the diversity of VC background (Buchner et al, 2018) and variances in venture capitalists' investment objectives, risk preferences, and expected returns (Alperovych et al, 2020) certainly matters, some literature suggests the effect of VC on technological innovation comes under many guises (Belderbos et al, 2018; Khurshed et al, 2020).…”