Abstract

Recent research has documented that CVC investments could provide a corporate investor with the learning opportunities for new technologies, thereby stimulating technological innovation and creating growth value for the corporate investor (e.g. Chesbrough, 2002; Chesbrough & Tucci, 2003; Dushnitsky & Lenox, 2005a; Schildt, Maula, & Keil, 2005). The literature, to date, has tended to focus on the independent impact of individual investment. However, CVC investments almost always involve multiple investments in a certain period of time; namely there simultaneously exists more than one entrepreneurial company in the portfolio. It is quite possible that portfolio companies interact with each other, and that the portfolio companies as a whole may impact the corporate investor in a way different from their independent individual impacts. Thus, in this study we propose that sub-additivity in costs through resource sharing, and super-additivity in value because of complementarities (Tanriverdi & Venkatraman, 2005) would result in a curvilinear relation between portfolio diversification and growth value of its parent company. In addition, we also investigate the extent to which the structural characteristics of a CVC program such as autonomy and syndication influence its CVC managers’ investment decisions with regard to the two types of diversification.

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