Family Firms in Corporate Venture Capital: The Impact of Socioemotional Wealth on Investment Strategies and Innovation Outcomes

Abstract

Increasingly, scholars have begun to study corporate venture capital (CVC) investment strategies and the motivations for corporate CVC activity. Yet, surprisingly few studies have examined how ownership structure, particularly family ownership, matters for CVC. By combining the existing CVC literature with the family business literature, we aim to bridge this gap and investigate how family ownership of the parent organization behind CVCs influences decision-making in these activities. Specifically, we explore three interrelated aspects of CVC activity: investment strategies, post- investment involvement, and innovation performance outcomes. Drawing on socioemotional wealth (SEW) theory, we highlight distinguishing features of family firms and expect to ascertain significant differences between family and non-family firms in the CVC domain. We empirically investigate a global sample of 311 publicly listed CVCs involved in 8,268 deals from 2005 to 2022 and find differences relating to investment strategies and the ability to generate innovation from their investments. Most notably, we find that family firms invest larger equity amounts in earlier rounds, conduct fewer follow-on investments, and extract greater innovation output from board participation. Our results thus indicate that ownership structure does affect strategic decision-making in a CVC context and highlight the importance of considering the unique characteristics of family firms when studying CVC.