Why do more and more large public firms consider and establish corporate venture capital (CVC) divisions to make equity investments in early-stage entrepreneurial ventures?

In his recent work, Song Ma from Yale School of Management investigates the full lifecycle of corporate venture capital by asking why industrial firms start and terminate their CVC divisions and how they invest in startups. He finds that CVC entry concentrates in firms that experience deteriorations of internal innovation. At the investment stage, CVCs select startups with a similar technological focus but which have a non-overlapping knowledge base, and then integrate technologies generated from these ventures that create strategic value. CVCs are terminated when parent firms’ innovation recovers.

Read full paper “The Life Cycle of Corporate Venture Capital” by Song Ma, Review of Financial Studies (hhz042) at Oxford Academic.