INTERACTIVE PAPER
Corporate Innovation and the Interplay of Corporate Venture Capital and Internal R&d
Sergey Anokhin, Case Western Reserve University
William Schulze, University of Utah
Principal Topic
Relationships between corporate venture capital (CVC) and internal research and development (R&D) have generated much debate in the CVC literature. Some researchers see them as substitutive while others expect them to be complementary. Using agency as a theoretical lens this study addresses the controversy and develops new insights into the nature of the CVC-R&D interplay in the context of corporate innovation. By considering both economic and behavioral components of the interplay the framework developed here explains the contradictory findings reported by the earlier literature.
Method
We address these issues using a panel data on 163 corporations engaged in corporate venture capital investments. Data pertaining to CVC investments covers years 1998 to 2001 while data pertaining to corporate innovation extends through 2003. This enabled us to test the effects of different time lags. Malmquist productivity index decomposition was used to calculate the rates of realized corporate innovation.
Results and Implications
The analysis demonstrates that the nature of the interplay is complex and shows the presence of non-linear effects as well as a three-way interaction between CVC, R&D, and organizational slack in the context of corporate innovation. While both CVC and R&D appear to be positively related to the rates of corporate innovation, the study suggests that CVC may have a long-term effect on innovation while R&D is most influential in the immediate perspective. The implication is that qualitatively R&D and CVC are not perfect substitutes. To ensure successful technical advancement in short- and long-term perspectives corporations may be better off supporting both own and outside suppliers of innovative ideas.
The results suggest that in the high-slack environments CVC positively moderates the effect of R&D on innovation while in the low-slack environments this moderation is negative. The study supports the existence of the inverted U-shaped relationship between CVC intensity and corporate innovation. The paper utilizes new methodology to assess realized innovation. By advancing research in the field of corporate venture capital the study contributes to entrepreneurship, strategy, and innovation literatures.
CONTACT: Sergey Anokhin; 220 PBL Building, Case Western Reserve University, 10900 Euclid Ave, Cleveland, OH 44106-7235; (T): 216-368-5372; anokhin@case.edu