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Negative performance feedback and corporate venture capital: The moderating effect of CEO overconfidence

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  • Liangyong Wan
  • Rui Li
  • Yujiao Chen

Abstract

Corporate venture capital (CVC) has consistently proven its importance for firm innovation, growth, and other strategic goals. However, research on the antecedents of CVC is still scarce. Drawing on the behavioural theory of the firm, we examine how performance feedback affects the decision to pursue CVC. Empirical results using panel data on Chinese A-share listed firms from 2011 to 2019 indicate that there is an inverted U-shaped relationship between negative performance feedback and the probability of initiating CVC. Moreover, such an effect is moderated by CEO overconfidence in that it weakens the inverted U-shaped relationship. Further study shows that CVC aids in firm innovation and creates firm value. Our findings highlight the importance of performance feedback on corporate venture capital.

Suggested Citation

  • Liangyong Wan & Rui Li & Yujiao Chen, 2022. "Negative performance feedback and corporate venture capital: The moderating effect of CEO overconfidence," Applied Economics, Taylor & Francis Journals, vol. 54(16), pages 1829-1843, April.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:16:p:1829-1843
    DOI: 10.1080/00036846.2021.1982133
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    Cited by:

    1. Marco Cucculelli & Riccardo Cappelli & Jasmine Mondolo, 2024. "Does market power drive business model innovation? Evidence from Italian family manufacturing firms," Small Business Economics, Springer, vol. 63(1), pages 447-475, June.
    2. Chen, Zhuming & Luo, Xue, 2024. "Optimal investment and exit decision of venture capitals with multiple heterogeneous Beliefs," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1138-1153.
    3. Ziyuan Sun & Xiao Sun & Yuting Dong, 2024. "Does negative environmental performance feedback induce substantive green innovation? The moderating roles of external regulations and internal incentive," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(4), pages 2953-2976, July.
    4. Guo, Jianquan & Cheng, He, 2024. "Performance feedback on sales growth and M&A: Evidence from China," Japan and the World Economy, Elsevier, vol. 69(C).
    5. Zhiyi Qiu & Bingyi Liu & Ye Yang, 2023. "Like Performance, Perfect Match: Role of Past Performance in Venture Capital Syndication," SAGE Open, , vol. 13(4), pages 21582440231, December.

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