Corporate Venture Capital Portfolios and the Implications of Portfolio Characteristics on Venture Innovative Performance: The Implications of Size, Industry Diversity, and Geographic Diversity

Abstract

This paper investigates how a venture’s innovative performance is impacted by the characteristics of its corporate venture capital (CVC) investor’s portfolio. While scholars have shown some growing interest in the portfolio perspective on CVC, its implications for the venture remain unexplored. Drawing on theory of organizational learning, knowledge networks, and the relational view, we analyze how portfolios of different characteristics facilitate intra-portfolio knowledge sharing and relational advantages to foster innovation for the ventures involved. To do this, we derive three central portfolio characteristics, namely, size, industry diversity, and geographic diversity, and empirically test their effect on venture patenting activity. A data set of 439 U.S. ventures in the semiconductor and biotechnology industries that received CVC investment between 1990-2020 reveals that: i) the number of ventures in a portfolio has a positive relationship with a venture’s innovative performance, ii) the diversity of industries represented in a portfolio has an inverted U-shaped relationship, and iii) the diversity of geographic locations represented in a portfolio has a U-shaped relationship. Our results thus indicate that portfolio characteristics do have explanatory ability for a venture’s innovative performance. The findings highlight the complexities of inter-organizational learning within CVC portfolios and calls for further research on the topic.