CVC AND INNOVATION PERFORMANCE: THE EFFECT OF TECHNOLOGICAL DISTANCE WITH STARTUPS AND COINVESTORS

Firms are increasingly opening their boundaries by engaging in corporate venture capital (CVC) programs as potential gateway into knowledge and technologies of innovative startups. By investing in promising startups across diverse industries with different technological knowledge from the knowledge base of the investing corporate, CVC programs constitute a vehicle for corporates to both exploit and explore innovation opportunities. We first examine the relationship between more explorative CVC investments portfolio and the innovation performance of the corporate. Then, we argue that when syndicating the CVC investments with a co-investor, the portfolio of syndication partners may affect the aforementioned curvilinear relationship. Drawing on a panel data set of 494 US corporates operating in a variety of industries that have engaged in CVC programs co-investing with other corporates from 1995 to 2014, we find an inverted U-shaped relationship between the CVC technological distance and corporate’s innovation performance, however, our results suggest that this relationship is not moderated by the CVC syndication portfolio. Our results have important implications for corporate venture capital in particular, and innovation strategy in general.