IDEAS home Printed from https://ideas.repec.org/a/sae/entthe/v48y2024i1p35-70.html
   My bibliography  Save this article

Beneficial, Harmful, or Both? Effects of Corporate Venture Capital and Alliance Activity on Product Recalls

Author

Listed:
  • David Bendig
  • Simon Hensellek
  • Julian Schulte

Abstract

Despite growing numbers of corporate venture capital (CVC) deals and alliances, their effectiveness is not guaranteed. This paper investigates the positive and negative impacts of CVC and alliance activity on product safety under different levels of market turbulence. Using a resource-based learning perspective and panel data from large U.S. firms, we find that both CVC and alliance activity have inverted U-shaped relationships with product recall likelihood. Market turbulence moderates both relationships, but differently. We discuss how learning theory complements the resource-based view to understand why no or rather bold external venturing are less harmful than small-scale “stuck-in-the-middle†initiatives.

Suggested Citation

  • David Bendig & Simon Hensellek & Julian Schulte, 2024. "Beneficial, Harmful, or Both? Effects of Corporate Venture Capital and Alliance Activity on Product Recalls," Entrepreneurship Theory and Practice, , vol. 48(1), pages 35-70, January.
    • Handle: RePEc:sae:entthe:v:48:y:2024:i:1:p:35-70
    DOI: 10.1177/10422587221141682
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/10422587221141682
    Download Restriction: no
    File URL: https://libkey.io/10.1177/10422587221141682?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Ujjal Kumar Mukherjee & Kingshuk K. Sinha, 2018. "Product Recall Decisions in Medical Device Supply Chains: A Big Data Analytic Approach to Evaluating Judgment Bias," Production and Operations Management, Production and Operations Management Society, vol. 27(10), pages 1816-1833, October.
    3. Bilal Gokpinar & Wallace J. Hopp & Seyed M. R. Iravani, 2010. "The Impact of Misalignment of Organizational Structure and Product Architecture on Quality in Complex Product Development," Management Science, INFORMS, vol. 56(3), pages 468-484, March.
    4. David R. King & Dan R. Dalton & Catherine M. Daily & Jeffrey G. Covin, 2004. "Meta‐analyses of post‐acquisition performance: indications of unidentified moderators," Strategic Management Journal, Wiley Blackwell, vol. 25(2), pages 187-200, February.
    5. Gary Dushnitsky & J. Myles Shaver, 2009. "Limitations to interorganizational knowledge acquisition: the paradox of corporate venture capital," Strategic Management Journal, Wiley Blackwell, vol. 30(10), pages 1045-1064, October.
    6. Danny Miller & Peter H. Friesen, 1983. "Strategy‐making and environment: The third link," Strategic Management Journal, Wiley Blackwell, vol. 4(3), pages 221-235, July.
    7. Belderbos, René & Jacob, Jojo & Lokshin, Boris, 2018. "Corporate venture capital (CVC) investments and technological performance: Geographic diversity and the interplay with technology alliances," Journal of Business Venturing, Elsevier, vol. 33(1), pages 20-34.
    8. Markku V. J. Maula & Thomas Keil & Shaker A. Zahra, 2013. "Top Management’s Attention to Discontinuous Technological Change: Corporate Venture Capital as an Alert Mechanism," Organization Science, INFORMS, vol. 24(3), pages 926-947, June.
    9. Gerwin Fels & Markus Kronberger & Tobias Gutmann, 2021. "Revealing the underlying drivers of CVC performance— a literature review and research agenda," Venture Capital, Taylor & Francis Journals, vol. 23(1), pages 67-109, January.
    10. Alok R. Saboo & Rajdeep Grewal, 2013. "Stock Market Reactions to Customer and Competitor Orientations: The Case of Initial Public Offerings," Marketing Science, INFORMS, vol. 32(1), pages 70-88, October.
    11. Sriram Thirumalai & Kingshuk K. Sinha, 2011. "Product Recalls in the Medical Device Industry: An Empirical Exploration of the Sources and Financial Consequences," Management Science, INFORMS, vol. 57(2), pages 376-392, February.
    12. Anokhin, Sergey & Wincent, Joakim & Oghazi, Pejvak, 2016. "Strategic effects of corporate venture capital investments," Journal of Business Venturing Insights, Elsevier, vol. 5(C), pages 63-69.
    13. Inkpen, Andrew, 1998. "Learning, knowledge acquisition, and strategic alliances," European Management Journal, Elsevier, vol. 16(2), pages 223-229, April.
    14. Martin Ganco & Cameron D. Miller & Puay Khoon Toh, 2020. "From litigation to innovation: Firms' ability to litigate and technological diversification through human capital," Strategic Management Journal, Wiley Blackwell, vol. 41(13), pages 2436-2473, December.
    15. Johan Wiklund & Dean A. Shepherd, 2009. "The Effectiveness of Alliances and Acquisitions: The Role of Resource Combination Activities," Entrepreneurship Theory and Practice, , vol. 33(1), pages 193-212, January.
    16. Narayanan, V.K. & Yang, Yi & Zahra, Shaker A., 2009. "Corporate venturing and value creation: A review and proposed framework," Research Policy, Elsevier, vol. 38(1), pages 58-76, February.
    17. Deeds, David L. & Hill, Charles W. L., 1996. "Strategic alliances and the rate of new product development: An empirical study of entrepreneurial biotechnology firms," Journal of Business Venturing, Elsevier, vol. 11(1), pages 41-55, January.
    18. Kaitlin D. Wowak & Christopher A. Boone, 2015. "So Many Recalls, So Little Research: A Review of the Literature and Road map for Future Research," Journal of Supply Chain Management, Institute for Supply Management, vol. 51(4), pages 54-72, October.
    19. Arturs Kalnins, 2018. "Multicollinearity: How common factors cause Type 1 errors in multivariate regression," Strategic Management Journal, Wiley Blackwell, vol. 39(8), pages 2362-2385, August.
    20. Mouri, Nacef & Sarkar, M.B. & Frye, Melissa, 2012. "Alliance portfolios and shareholder value in post-IPO firms: The moderating roles of portfolio structure and firm-level uncertainty," Journal of Business Venturing, Elsevier, vol. 27(3), pages 355-371.
    21. 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.
    22. Dushnitsky, Gary & Lenox, Michael J., 2005. "When do incumbents learn from entrepreneurial ventures?: Corporate venture capital and investing firm innovation rates," Research Policy, Elsevier, vol. 34(5), pages 615-639, June.
    23. Thomas Keil, 2004. "Building External Corporate Venturing Capability," Journal of Management Studies, Wiley Blackwell, vol. 41(5), pages 799-825, July.
    24. José Mata & Claudia Alves, 2018. "The survival of firms founded by immigrants: Institutional distance between home and host country, and experience in the host country," Strategic Management Journal, Wiley Blackwell, vol. 39(11), pages 2965-2991, November.
    25. Cho, Sam Yul & Arthurs, Jonathan D., 2018. "The influence of alliance experience on acquisition premiums and post-acquisition performance," Journal of Business Research, Elsevier, vol. 88(C), pages 1-10.
    26. Kathleen M. Eisenhardt & Claudia Bird Schoonhoven, 1996. "Resource-based View of Strategic Alliance Formation: Strategic and Social Effects in Entrepreneurial Firms," Organization Science, INFORMS, vol. 7(2), pages 136-150, April.
    27. Corey C. Phelps & Sandip Basu & Suresh Kotha, 2011. "Towards understanding who makes corporate venture capital investments and why," Post-Print hal-00575634, HAL.
    28. Alok R. Saboo & Anindita Chakravarty & Rajdeep Grewal, 2016. "Organizational Debut on the Public Stage: Marketing Myopia and Initial Public Offerings," Marketing Science, INFORMS, vol. 35(4), pages 656-675, July.
    29. Niosi, Jorge, 2003. "Alliances are not enough explaining rapid growth in biotechnology firms," Research Policy, Elsevier, vol. 32(5), pages 737-750, May.
    30. Bharat N. Anand & Tarun Khanna, 2000. "Do firms learn to create value? The case of alliances," Strategic Management Journal, Wiley Blackwell, vol. 21(3), pages 295-315, March.
    31. Jeffrey G. Covin & Dennis P. Slevin, 1989. "Strategic management of small firms in hostile and benign environments," Strategic Management Journal, Wiley Blackwell, vol. 10(1), pages 75-87, January.
    32. Wim Vanhaverbeke & Geert Duysters & Niels Noorderhaven, 2002. "External Technology Sourcing Through Alliances or Acquisitions: An Analysis of the Application-Specific Integrated Circuits Industry," Organization Science, INFORMS, vol. 13(6), pages 714-733, December.
    33. Carina Lomberg & Diemo Urbig & Christoph Stöckmann & Louis D. Marino & Pat H. Dickson, 2017. "Entrepreneurial Orientation: The Dimensions’ Shared Effects in Explaining Firm Performance," Entrepreneurship Theory and Practice, , vol. 41(6), pages 973-998, November.
    34. Adam J. Wowak & Michael J. Mannor & Kaitlin D. Wowak, 2015. "Throwing caution to the wind: The effect of CEO stock option pay on the incidence of product safety problems," Strategic Management Journal, Wiley Blackwell, vol. 36(7), pages 1082-1092, July.
    35. Maula, Markku V.J. & Autio, Erkko & Murray, Gordon C., 2009. "Corporate venture capital and the balance of risks and rewards for portfolio companies," Journal of Business Venturing, Elsevier, vol. 24(3), pages 274-286, May.
    36. Klaus Marhold & Marco Jinhwan Kim & Jina Kang, 2017. "The Effects Of Alliance Portfolio Diversity On Innovation Performance: A Study Of Partner And Alliance Characteristics In The Bio-Pharmaceutical Industry," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 1-24, January.
    37. Thomas J. Chemmanur & Elena Loutskina & Xuan Tian, 2014. "Corporate Venture Capital, Value Creation, and Innovation," The Review of Financial Studies, Society for Financial Studies, vol. 27(8), pages 2434-2473.
    38. Manuel Becerra & Randi Lunnan & Lars Huemer, 2008. "Trustworthiness, Risk, and the Transfer of Tacit and Explicit Knowledge Between Alliance Partners," Journal of Management Studies, Wiley Blackwell, vol. 45(4), pages 691-713, June.
    39. Rachna Shah & George P. Ball & Serguei Netessine, 2017. "Plant Operations and Product Recalls in the Automotive Industry: An Empirical Investigation," Management Science, INFORMS, vol. 63(8), pages 2439-2459, August.
    40. 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.
    41. Zeki Simsek, 2009. "Organizational Ambidexterity: Towards a Multilevel Understanding," Journal of Management Studies, Wiley Blackwell, vol. 46(4), pages 597-624, June.
    42. David R. King & Gang Wang & Mehdi Samimi & Andres Felipe Cortes, 2021. "A Meta‐Analytic Integration of Acquisition Performance Prediction," Journal of Management Studies, Wiley Blackwell, vol. 58(5), pages 1198-1236, July.
    43. Seung Ho Park & Gerardo R. Ungson, 2001. "Interfirm Rivalry and Managerial Complexity: A Conceptual Framework of Alliance Failure," Organization Science, INFORMS, vol. 12(1), pages 37-53, February.
    44. Necmi Kemal Avkiran, 2018. "An in-depth discussion and illustration of partial least squares structural equation modeling in health care," Health Care Management Science, Springer, vol. 21(3), pages 401-408, September.
    45. Frank T. Rothaermel & David L. Deeds, 2004. "Exploration and exploitation alliances in biotechnology: a system of new product development," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 201-221, March.
    46. 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.
    47. Melissa A. Schilling, 2009. "Understanding the alliance data," Strategic Management Journal, Wiley Blackwell, vol. 30(3), pages 233-260, March.
    48. Richard F. J. Haans & Constant Pieters & Zi-Lin He, 2016. "Thinking about U: Theorizing and testing U- and inverted U-shaped relationships in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(7), pages 1177-1195, July.
    49. Thomas Keil & Erkko Autio & Gerard George, 2008. "Corporate Venture Capital, Disembodied Experimentation and Capability Development," Journal of Management Studies, Wiley Blackwell, vol. 45(8), pages 1475-1505, December.
    50. Anokhin, Sergey & Peck, Simon & Wincent, Joakim, 2016. "Corporate venture capital: The role of governance factors," Journal of Business Research, Elsevier, vol. 69(11), pages 4744-4749.
    51. Geraldine A. Wu, 2012. "The Effect of Going Public on Innovative Productivity and Exploratory Search," Organization Science, INFORMS, vol. 23(4), pages 928-950, August.
    52. Sykes, Hollister B., 1990. "Corporate venture capital: Strategies for success," Journal of Business Venturing, Elsevier, vol. 5(1), pages 37-47, January.
    53. Rothaermel, Frank T. & Deeds, David L., 2006. "Alliance type, alliance experience and alliance management capability in high-technology ventures," Journal of Business Venturing, Elsevier, vol. 21(4), pages 429-460, July.
    54. Simon U. Lee & Jina Kang, 2015. "Technological Diversification Through Corporate Venture Capital Investments: Creating Various Options to Strengthen Dynamic Capabilities," Industry and Innovation, Taylor & Francis Journals, vol. 22(5), pages 349-374, July.
    55. Prashant Kale & Harbir Singh, 2007. "Building firm capabilities through learning: the role of the alliance learning process in alliance capability and firm‐level alliance success," Strategic Management Journal, Wiley Blackwell, vol. 28(10), pages 981-1000, October.
    56. Wadhwa, Anu & Phelps, Corey & Kotha, Suresh, 2016. "Corporate venture capital portfolios and firm innovation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 95-112.
    57. Ram Bala & Pradeep Bhardwaj & Pradeep K. Chintagunta, 2017. "Pharmaceutical Product Recalls: Category Effects and Competitor Response," Marketing Science, INFORMS, vol. 36(6), pages 931-943, November.
    58. Saim Kashmiri & Cameron Duncan Nicol & Sandeep Arora, 2017. "Me, myself, and I: influence of CEO narcissism on firms’ innovation strategy and the likelihood of product-harm crises," Journal of the Academy of Marketing Science, Springer, vol. 45(5), pages 633-656, September.
    59. Kashmiri, Saim & Brower, Jacob, 2016. "Oops! I did it again: Effect of corporate governance and top management team characteristics on the likelihood of product-harm crises," Journal of Business Research, Elsevier, vol. 69(2), pages 621-630.
    60. Ruihua Joy Jiang & Qingjiu Tom Tao & Michael D. Santoro, 2010. "Alliance portfolio diversity and firm performance," Strategic Management Journal, Wiley Blackwell, vol. 31(10), pages 1136-1144, October.
    Full references (including those not matched with items on IDEAS)

    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. Jeon, Euiju & Maula, Markku, 2022. "Progress toward understanding tensions in corporate venture capital: A systematic review," Journal of Business Venturing, Elsevier, vol. 37(4).
    2. Shuwaikh, Fatima & Dubocage, Emmanuelle, 2022. "Access to the Corporate Investors' Complementary Resources: A Leverage for Innovation in Biotech Venture Capital-Backed Companies," Technological Forecasting and Social Change, Elsevier, vol. 175(C).
    3. 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.
    4. 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.
    5. Wadhwa, Anu & Phelps, Corey & Kotha, Suresh, 2016. "Corporate venture capital portfolios and firm innovation," Journal of Business Venturing, Elsevier, vol. 31(1), pages 95-112.
    6. Patrick Haslanger & Erik E. Lehmann & Nikolaus Seitz, 2023. "The performance effects of corporate venture capital: a meta-analysis," The Journal of Technology Transfer, Springer, vol. 48(6), pages 2132-2160, December.
    7. Petrit Ademi & Monika C. Schuhmacher & Andrew L. Zacharakis, 2023. "Evaluating Affordance-Based Opportunities: A Conjoint Experiment of Corporate Venture Capital Managers’ Decision-Making," Entrepreneurship Theory and Practice, , vol. 47(6), pages 2293-2322, November.
    8. Stienstra, Miranda, 2020. "The determinants and performance implications of alliance partner acquisition," Other publications TiSEM 7fdee0c2-d4d2-4f5b-95e3-2, Tilburg University, School of Economics and Management.
    9. 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).
    10. 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.
    11. 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).
    12. Fatima Shuwaikh & Mathew Hughes & Souad Brinette & Sabrina Khemiri, 2024. "Investment decisions under uncertainty: Corporate venture capital as a real option," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2452-2471, April.
    13. Enkel, Ellen & Sagmeister, Veronika, 2020. "External corporate venturing modes as new way to develop dynamic capabilities," Technovation, Elsevier, vol. 96.
    14. Lin, Jun-You, 2020. "What affects new venture firm’s innovation more in corporate venture capital?," European Management Journal, Elsevier, vol. 38(4), pages 646-660.
    15. Li, Huashan & Bapuji, Hari & Talluri, Srinivas & Singh, Prakash J., 2022. "A Cross-disciplinary review of product recall research: A stakeholder-stage framework," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 163(C).
    16. Jeffrey J. Reuer & Ramakrishna Devarakonda, 2017. "Partner Selection in R&D Collaborations: Effects of Affiliations with Venture Capitalists," Organization Science, INFORMS, vol. 28(3), pages 574-595, June.
    17. Dev K. Dutta & Mary Beth Rousseau, 2019. "Alliance Experience, Industry Conditions, And External Technology Commercialisation," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 24(01), pages 1-24, January.
    18. Kang Hyunsung D, 2018. "A Start-Up’s R&D Stages and the Evolution of Financing Sources: Evidence from the Biotechnology Industry," Entrepreneurship Research Journal, De Gruyter, vol. 8(3), pages 1-19, July.
    19. Wang, Tao, 2023. "The ownership structure of corporate venture capital financing and innovation," Technovation, Elsevier, vol. 123(C).
    20. Jacob, Jojo & Belderbos, René & Lokshin, Boris, 2023. "Entangled modes: Boundaries to effective international knowledge sourcing through technology alliances and technology-based acquisitions," Technovation, Elsevier, vol. 122(C).

    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:sae:entthe:v:48:y:2024:i:1:p:35-70. 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: SAGE Publications (email available below). General contact details of provider: .

    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.