IDEAS home Printed from https://ideas.repec.org/a/eee/jbvent/v25y2010i4p376-388.html
   My bibliography  Save this article

The influence of R&D investment on the use of corporate venture capital: An industry-level analysis

Author

Listed:
  • Sahaym, Arvin
  • Steensma, H. Kevin
  • Barden, Jeffrey Q.

Abstract

We consider how internal research and development (R&D) influences the use of corporate venture capital (CVC) and how this relationship varies across industries. We find that, in general, R&D investments increase the number of CVC deals in an industry. We also find that R&D investment has a particularly strong influence on the use of CVC in industries that are growing rapidly and changing technologically. Our analysis provides greater clarity on the relationships involving R&D and CVC in the presence of contingencies by integrating insights of absorptive capacity and real options reasoning.

Suggested Citation

  • Sahaym, Arvin & Steensma, H. Kevin & Barden, Jeffrey Q., 2010. "The influence of R&D investment on the use of corporate venture capital: An industry-level analysis," Journal of Business Venturing, Elsevier, vol. 25(4), pages 376-388, July.
    • Handle: RePEc:eee:jbvent:v:25:y:2010:i:4:p:376-388
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0883-9026(08)00115-8
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dale W. Jorgenson, 1984. "The Role of Energy in Productivity Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 11-26.
    2. Bruce Kogut & Nalin Kulatilaka, 2001. "Capabilities as Real Options," Organization Science, INFORMS, vol. 12(6), pages 744-758, December.
    3. Burgelman, Robert A., 2002. "Strategy as Vector and the Inertia of Co-evolutionary Lock-in," Research Papers 1745, Stanford University, Graduate School of Business.
    4. Hagedoorn, John, 2002. "Inter-firm R&D partnerships: an overview of major trends and patterns since 1960," Research Policy, Elsevier, vol. 31(4), pages 477-492, May.
    5. Crafts, Nicholas F R, 1996. "The First Industrial Revolution: A Guided Tour for Growth Economists," American Economic Review, American Economic Association, vol. 86(2), pages 197-201, May.
    6. Donald Siegel & Zvi Griliches, 1992. "Purchased Services, Outsourcing, Computers, and Productivity in Manufacturing," NBER Chapters, in: Output Measurement in the Service Sectors, pages 429-460, National Bureau of Economic Research, Inc.
    7. Kamien, Morton I. & Zang, Israel, 2000. "Meet me halfway: research joint ventures and absorptive capacity," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 995-1012, October.
    8. Terleckyj, Nestor E, 1980. "What Do R & D Numbers Tell Us about Technological Change?," American Economic Review, American Economic Association, vol. 70(2), pages 55-61, May.
    9. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-583, June.
    10. Wesley M. Cohen & Daniel A. Levinthal, 1994. "Fortune Favors the Prepared Firm," Management Science, INFORMS, vol. 40(2), pages 227-251, February.
    11. Constance E. Helfat, 1994. "Evolutionary Trajectories in Petroleum Firm R&D," Management Science, INFORMS, vol. 40(12), pages 1720-1747, December.
    12. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
    13. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    14. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September.
    15. Arvin Sahaym & H. Kevin Steensma & Melissa A. Schilling, 2007. "The Influence of Information Technology on the Use of Loosely Coupled Organizational Forms: An Industry-Level Analysis," Organization Science, INFORMS, vol. 18(5), pages 865-880, October.
    16. Kathleen M. Eisenhardt & Jeffrey A. Martin, 2000. "Dynamic capabilities: what are they?," Strategic Management Journal, Wiley Blackwell, vol. 21(10‐11), pages 1105-1121, October.
    17. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    18. Brian Boyd, 1990. "Corporate linkages and organizational environment: A test of the resource dependence model," Strategic Management Journal, Wiley Blackwell, vol. 11(6), pages 419-430, October.
    19. Paul Gompers & Josh Lerner & David Scharfstein, 2005. "Entrepreneurial Spawning: Public Corporations and the Genesis of New Ventures, 1986 to 1999," Journal of Finance, American Finance Association, vol. 60(2), pages 577-614, April.
    20. Rebecca Henderson & Iain Cockburn, 1996. "Scale, Scope, and Spillovers: The Determinants of Research Productivity in Drug Discovery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 32-59, Spring.
    21. Jaffe, Adam B, 1986. "Technological Opportunity and Spillovers of R&D: Evidence from Firms' Patents, Profits, and Market Value," American Economic Review, American Economic Association, vol. 76(5), pages 984-1001, December.
    22. Jeffrey G. Covin & Morgan P. Miles, 2007. "Strategic Use of Corporate Venturing," Entrepreneurship Theory and Practice, , vol. 31(2), pages 183-207, March.
    23. Rita Gunther McGrath & Atul Nerkar, 2004. "Real options reasoning and a new look at the R&D investment strategies of pharmaceutical firms," Strategic Management Journal, Wiley Blackwell, vol. 25(1), pages 1-21, January.
    24. Thomas Keil & Markku Maula & Henri Schildt & Shaker A. Zahra, 2008. "The effect of governance modes and relatedness of external business development activities on innovative performance," Strategic Management Journal, Wiley Blackwell, vol. 29(8), pages 895-907, August.
    25. Dushnitsky, Gary & Lenox, Michael J., 2006. "When does corporate venture capital investment create firm value?," Journal of Business Venturing, Elsevier, vol. 21(6), pages 753-772, November.
    26. Phyllis A. Siegel & Donald C. Hambrick, 2005. "Pay Disparities Within Top Management Groups: Evidence of Harmful Effects on Performance of High-Technology Firms," Organization Science, INFORMS, vol. 16(3), pages 259-274, June.
    27. Richard A. Bettis & Michael A. Hitt, 1995. "The new competitive landscape," Strategic Management Journal, Wiley Blackwell, vol. 16(S1), pages 7-19.
    28. Gary Dushnitsky & Michael J. Lenox, 2005. "When do firms undertake R&D by investing in new ventures?," Strategic Management Journal, Wiley Blackwell, vol. 26(10), pages 947-965, October.
    29. Paul Gompers & Josh Lerner, 2001. "The Venture Capital Revolution," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 145-168, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keongtae Kim & Anandasivam Gopal & Gerard Hoberg, 2016. "Does Product Market Competition Drive CVC Investment? Evidence from the U.S. IT Industry," Information Systems Research, INFORMS, vol. 27(2), pages 259-281, June.
    2. Galloway, Tera L. & Miller, Douglas R. & Sahaym, Arvin & Arthurs, Jonathan D., 2017. "Exploring the innovation strategies of young firms: Corporate venture capital and venture capital impact on alliance innovation strategy," Journal of Business Research, Elsevier, vol. 71(C), pages 55-65.
    3. Michele Cincera & Anabela Marques Santos, 2015. "Innovation and Access to Finance – A Review of the Literature," Working Papers TIMES² 2015-16, ULB -- Universite Libre de Bruxelles.
    4. Jeon, Euiju & Maula, Markku, 2022. "Progress toward understanding tensions in corporate venture capital: A systematic review," Journal of Business Venturing, Elsevier, vol. 37(4).
    5. Patrick Röhm, 2018. "Exploring the landscape of corporate venture capital: a systematic review of the entrepreneurial and finance literature," Management Review Quarterly, Springer, vol. 68(3), pages 279-319, August.
    6. Dushnitsky, Gary & Klueter, Thomas, 2017. "Which industries are served by online marketplaces for technology?," Research Policy, Elsevier, vol. 46(3), pages 651-666.
    7. Herrera-Echeverri, Hernan & Nandy, Debarshi K. & Fragua, Daniel, 2022. "The role of private equity investments on exports: Evidence from OECD countries," Journal of Multinational Financial Management, Elsevier, vol. 65(C).
    8. Sahaym, Arvin & Treviño, Len J. & Steensma, H. Kevin, 2012. "The influence of managerial discretion, innovation and uncertainty on export intensity: A real options perspective," International Business Review, Elsevier, vol. 21(6), pages 1131-1147.
    9. Dushnitsky, Gary & Yu, Lei, 2022. "Why do incumbents fund startups? A study of the antecedents of corporate venture capital in China," Research Policy, Elsevier, vol. 51(3).
    10. Michele Cincera & Anabela Santos, "undated". "Innovation and Access to Finance," IRMO Occasional Papers 6, Institute for Development and International Relations, Zagreb.
    11. Lee, Jeoung Yul & Yang, Young Soo & Park, Byung Il, 2020. "Interplay between dual dimensions of knowledge sharing within globalized chaebols: The moderating effects of organization size and global environmental munificence," International Business Review, Elsevier, vol. 29(6).
    12. Cabral, Joseph J. & Kumar, M.V. Shyam & Park, Haemin Dennis, 2024. "The value of a reputation for sustaining commitment in interfirm relationships: The inclusion of corporate venture capitalists in investment syndicates," Journal of Business Venturing, Elsevier, vol. 39(3).
    13. Tan, Siow-Hooi & Habibullah, Muzafar & Ong, Hway-Boon & Mohamed, Azali, 2019. "Moderating Effect of Slack Resources on the Charitable Giving and Firm Performance Nexus," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(3), pages 129-139.
    14. Vincent FRIGANT & Marina FLAMAND, 2015. "The diversity of carmakers\' behaviors vis-a-vis the Corporate Venture Capital," Cahiers du GREThA (2007-2019) 2015-24, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    15. Maribel Guerrero & José Ernesto Amorós & David Urbano, 2021. "Do employees’ generational cohorts influence corporate venturing? A multilevel analysis," Small Business Economics, Springer, vol. 57(1), pages 47-74, June.
    16. Sahaym, Arvin & Cho, Sam Yul & Kim, Sang Kyun & Mousa, Fariss-Terry, 2016. "Mixed blessings: How top management team heterogeneity and governance structure influence the use of corporate venture capital by post-IPO firms," Journal of Business Research, Elsevier, vol. 69(3), pages 1208-1218.
    17. Gada, Viswa Prasad & Popli, Manish & Malhotra, Shavin, 2024. "Geographic distance in cross-border acquisitions: The impact of CEO's psychological attributes," Journal of International Management, Elsevier, vol. 30(1).
    18. Varkey K. Titus Jr. & Brian S. Anderson, 2018. "Firm Structure and Environment as Contingencies to the Corporate Venture Capital-Parent Firm Value Relationship," Entrepreneurship Theory and Practice, , vol. 42(3), pages 498-522, May.
    19. Luc Armel G. Da Gbadji & Benoit Gailly & Armin Schwienbacher, 2015. "International Analysis of Venture Capital Programs of Large Corporations and Financial Institutions," Entrepreneurship Theory and Practice, , vol. 39(5), pages 1213-1246, September.
    20. Sarpong, David & Boakye, Derrick & Ofosu, George & Botchie, David, 2023. "The three pointers of research and development (R&D) for growth-boosting sustainable innovation system," Technovation, Elsevier, vol. 122(C).
    21. Yi Yang & Vadake K. Narayanan & Donna M. De Carolis, 2014. "The relationship between portfolio diversification and firm value: The evidence from corporate venture capital activity," Strategic Management Journal, Wiley Blackwell, vol. 35(13), pages 1993-2011, December.
    22. Sahaym, Arvin & Nam, Daeil, 2013. "International diversification of the emerging-market enterprises: A multi-level examination," International Business Review, Elsevier, vol. 22(2), pages 421-436.
    23. David Urbano & Andreu Turro & Mike Wright & Shaker Zahra, 2022. "Corporate entrepreneurship: a systematic literature review and future research agenda," Small Business Economics, Springer, vol. 59(4), pages 1541-1565, December.
    24. Wang, Hai & Chen, Hui & Ye, Shuai & Yin, Junya, 2024. "The impact of green finance on companies’ overcapacity: Evidence from green financial reform and innovation policy in China," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 1320-1336.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sahaym, Arvin & Treviño, Len J. & Steensma, H. Kevin, 2012. "The influence of managerial discretion, innovation and uncertainty on export intensity: A real options perspective," International Business Review, Elsevier, vol. 21(6), pages 1131-1147.
    2. Dushnitsky, Gary & Yu, Lei, 2022. "Why do incumbents fund startups? A study of the antecedents of corporate venture capital in China," Research Policy, Elsevier, vol. 51(3).
    3. Gianluigi Giustiziero & Aseem Kaul & Brian Wu, 2019. "The Dynamics of Learning and Competition in Schumpeterian Environments," Organization Science, INFORMS, vol. 30(4), pages 668-693, July.
    4. Hussinger, Katrin & Grimpe, Christoph, 2007. "Firm Acquisitions and Technology Strategy: Corporate versus Private Equity Investors," ZEW Discussion Papers 07-066, ZEW - Leibniz Centre for European Economic Research.
    5. Kaiser, Ulrich & Grimpe, Christoph, 2008. "Gains and Pains from Contract Research: A Transaction and Firm-level Perspective," ZEW Discussion Papers 08-002, ZEW - Leibniz Centre for European Economic Research.
    6. D׳Souza, Derrick E. & Kulkarni, Shailesh S., 2015. "A framework and model for absorptive capacity in a dynamic multi-firm environment," International Journal of Production Economics, Elsevier, vol. 167(C), pages 50-62.
    7. Belderbos, Rene & Carree, Martin & Diederen, Bert & Lokshin, Boris & Veugelers, Reinhilde, 2004. "Heterogeneity in R&D cooperation strategies," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1237-1263, November.
    8. Vareska Van de Vrande & Wim Vanhaverbeke, 2013. "How Prior Corporate Venture Capital Investments Shape Technological Alliances: A Real Options Approach," Entrepreneurship Theory and Practice, , vol. 37(5), pages 1019-1043, September.
    9. Cohen, Wesley M., 2010. "Fifty Years of Empirical Studies of Innovative Activity and Performance," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 129-213, Elsevier.
    10. Henri A. Schildt & Markku V.J. Maula & Thomas Keil, 2005. "Explorative and Exploitative Learning from External Corporate Ventures," Entrepreneurship Theory and Practice, , vol. 29(4), pages 493-515, July.
    11. Grunfeld, Leo A., 2003. "Meet me halfway but don't rush: absorptive capacity and strategic R&D investment revisited," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1091-1109, October.
    12. Cassiman, Bruno & Perez-Castrillo, David & Veugelers, Reinhilde, 2002. "Endogenizing know-how flows through the nature of R&D investments," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 775-799, June.
    13. Shivaram V. Devarakonda & Brian T. McCann & Jeffrey J. Reuer, 2018. "Marshallian Forces and Governance Externalities: Location Effects on Contractual Safeguards in Research and Development Alliances," Organization Science, INFORMS, vol. 29(6), pages 1112-1129, December.
    14. Dirk Czarnitzki & Katrin Hussinger & Cédric Schneider, 2015. "R&D Collaboration with Uncertain Intellectual Property Rights," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 183-204, March.
    15. Dawid, Herbert & Hellmann, Tim, 2020. "R&D investments under endogenous cluster formation," Journal of Economic Behavior & Organization, Elsevier, vol. 174(C), pages 253-283.
    16. Marco Da Rin & María Fabiana Penas, 2017. "Venture capital and innovation strategies," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 26(5), pages 781-800.
    17. Bart Leten & Rene Belderbos & Bart Van Looy, 2016. "Entry and Technological Performance in New Technology Domains: Technological Opportunities, Technology Competition and Technological Relatedness," Journal of Management Studies, Wiley Blackwell, vol. 53(8), pages 1257-1291, December.
    18. Jatinder S. Sidhu & Harry R. Commandeur & Henk W. Volberda, 2007. "The Multifaceted Nature of Exploration and Exploitation: Value of Supply, Demand, and Spatial Search for Innovation," Organization Science, INFORMS, vol. 18(1), pages 20-38, February.
    19. Giovanni Gavetti, 2012. "PERSPECTIVE—Toward a Behavioral Theory of Strategy," Organization Science, INFORMS, vol. 23(1), pages 267-285, February.
    20. Harris, Jeremiah & Siebert, Ralph, 2017. "Firm-specific time preferences and postmerger firm performance," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 32-62.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jbvent:v:25:y:2010:i:4:p:376-388. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jbusvent .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.