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Corporate venture capital, strategic alliances, and the governance of newly public firms

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  • Ivanov, Vladimir I.
  • Masulis, Ronald W.

Abstract

We examine the effect of investments by corporate venture capitalists (CVCs) on the governance structures of venture backed IPOs. One of the main differences between CVCs and traditional venture capitalists (TVCs) is that the former often invest for strategic reasons and enter into various types of strategic alliances with their portfolio firms that last well beyond the IPO. We argue that the presence of such strategic alliances will have a significant impact on the governance structure of CVC backed firms when they go public and in the following years. Using a sample of venture backed IPOs, we evaluate several hypotheses concerning the role of CVCs in the corporate governance of newly public firms. We find that strategic CVC backed IPOs have weaker CEOs and more outsiders on the board and on the compensation committee than a carefully selected sample of matching firms. In addition, the probability of forced CEOs turnover is higher for strategic CVC backed IPOs, while at the same time these firms use staggered boards more frequently. In contrast, the governance structures of purely financial CVC backed IPO firms and their matching firms do not exhibit any significant differences.

Suggested Citation

  • Ivanov, Vladimir I. & Masulis, Ronald W., 2008. "Corporate venture capital, strategic alliances, and the governance of newly public firms," CEI Working Paper Series 2008-15, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2008-15
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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29290/WP2008-15.pdf
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    References listed on IDEAS

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    1. Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(4), pages 1185-1209.
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    Cited by:

    1. 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.
    2. Eric Braune & Jean-Sebastien Lantz & Jean-Michel Sahut & Frédéric Teulon, 2019. "Corporate venture capital in the IT sector and relationships in VC syndication networks," Post-Print hal-02467749, HAL.
    3. Eric Braune & Jean-Sébastien Lantz & Jean-Michel Sahut & Frédéric Teulon, 2021. "Corporate venture capital in the IT sector and relationships in VC syndication networks," Small Business Economics, Springer, vol. 56(3), pages 1221-1233, February.
    4. Eric Braune & Jean-Sébastien Lantz & Jean-Michel Sahut & Frédéric Teulon, 2021. "Corporate venture capital in the IT sector and relationships in VC syndication networks," Post-Print hal-03497346, HAL.

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