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The Corporate Venture Capital Exit Decision

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  • Maxin, Hannes

Abstract

This paper investigates an entrepreneur who decides whether to obtain funds from an independent venture capital firm (IVC) or a corporate venture capital firm (CVC) to develop an innovative product. In case of success, the entrepreneur enters a market and competes with an incumbent. The CVC is a subsidiary of an input producer. This input will be required by both the entrepreneur and the incumbent to produce their products. I analyze three different exit routes: (1) IPO, (2) Trade Sale via incumbent and (3) Trade Sale via input producer. I show that the CVC does not exit via a Trade Sale to its parental company due to a loss of demand for the input good. Moreover, I find that the IVC exits more innovative ventures more likely via an IPO, in comparison with the CVC. The analysis generates a number of empirical implications for the difference between IVCs and CVCs and the link between CVCs and the Trade Sale decision of their parental companies.

Suggested Citation

  • Maxin, Hannes, 2018. "The Corporate Venture Capital Exit Decision," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181647, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181647
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    References listed on IDEAS

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    More about this item

    Keywords

    Corporate Venture Capital; Venture Capital; Exit; Complementarity; IPO; Trade Sale;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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