A widely held belief is that corporate venturing represents the means through which firms promote growth and sustain strategic competitiveness. Previous research has generally approached corporate venturing as a dichotomous decision of entry or no entry. Hence, such models overlook the plausible observation that rather than entering into new markets through large-scale investments, firms may establish a minor presence, or foothold, through incremental investments. Footholds allow firms to increase market awareness and reduce uncertainty attributed to larger investments. Further, with few exceptions, prior studies assume away the differing industry contexts in which firms pursue venturing actions. Building on real options theory and research examining corporate venturing, we propose a real options model of sequential market entry and expansion in which entrepreneurial firms establish footholds in new markets to learn more about those markets and to reduce uncertainty associated with larger-scale market entry.
Holcomb, Tim R.; Upson, John W.; and Webb, Justin W.
"CORPORATE VENTURING AND THE DECISION TO EXERCISE FOOTHOLD INVESTMENTS: A REAL OPTIONS PERSPECTIVE (SUMMARY),"
Frontiers of Entrepreneurship Research: Vol. 28
, Article 9.
Available at: http://digitalknowledge.babson.edu/fer/vol28/iss19/9