Embracing the Sharks: The impact of Information Disclosure on CVC Investments

Corporate venture capitalists (CVC) are considered key players in nurturing and providing specialized advice and resources to high-tech startups. However, startups’ concerns about misappropriation of their technology by CVCs may have impacted the CVC-startup matching process. Investigating and measuring such an impact is an empirical challenging due to sever endogeneity concerns and the difficulty to address the counterfactuals. In this study, we establish information withhold as an important strategy which startups use against the misappropriation. Moreover, we investigate the causal impact of information withhold on the likelihood, size and timing of CVC-startup match formation. We exploit the American Inventor’s Protection Act (AIPA) as an exogenous shock to technological information publicity, which enables us to measure an unbiased impact of information withhold. The results confirm that strategic information withhold by startups has lowered the incident of CVC investments, while informational exposure increases the likelihood, size and hazard rate of CVC-startup match.