Corporate Venture Capital Financing, Investor Leadership and Technological Influence of New Venture’s Invention

How the interaction between incumbent firms and new ventures drives economic growth has been at the center of attention since Schumpeter’s early work. In this paper, we focus on whether investments by a corporate venture capital (CVC) move the technological position of a new venture toward the technological frontier. In particular, we argue that CVC leadership in the syndicate facilitates the transfer of capabilities to the new venture, and that in turn helps the new venture to generate inventions with more technological influence. Based on semiconductor industry data from 1985 to 1995 and after accounting for selection in the CVC investment process, our regression results show that CVC leadership in the syndicate is associated to new venture inventions with more influence on the successive inventive activity. In addition, the effect decreases when the leadership position is derived from older investments. This suggests a ?honeymoon effect,? where the transfer of technological capabilities and support for the new venture wears out as time goes by. Our graphical analysis also found evidence of transfer of technological capabilities from the corporation to the new venture. This transfer is associated to the strength of CVC leadership in the syndicate. Interestingly, we found evidence of a less frequent transfer of technological capabilities from new venture to corporation and no strong evidence of this transfer when CVC investors do not hold leadership positions in the syndicate.