Ebook Strategic Benefits Of Corporate Venture Capital: The Case Of Industrial Companies
Identifying, selecting and exploiting the right new business opportunities are the essence of entrepreneurial activities and among the most important abilities of a successful entrepreneur. Shane and Venkataraman (2000) define entrepreneurship as the processes of discovery, evaluation, and exploitation of opportunities in order to create future goods and services. In broad terms, Ardichvili, et. al (2003) define an opportunity as “the chance to meet a market need (or interest or want) through a creative combination of resources to deliver superior value. Eckhardt and Shane (2003) define entrepreneurial opportunities as those “situations in which new goods, services, raw materials and organizing methods can be introduced through the formation of new means, ends, or means-ends relationships”.
According to Burgelman (1983), corporate entrepreneurship refers to “the process whereby firms engage in diversification through internal development”. This diversification often requires new resources combinations to extend the firm's activities in areas dissimilar, or marginally similar, to its current domain of competence and corresponding opportunity set. Sharma and Chrisman (1999) define a corporate entrepreneurship as “the process whereby an individual or a group of individuals, in association with an existing organization, create a new organization or instigate renewal or innovation within that organization”. In large established Firms, corporate entrepreneurship is an important tool for business development, revenue growth and as a promising path to enhance financial returns (Miles and Covin, 2002) and contribute to the achievement of some company’s strategic objectives (Rind, 1981). Corporate entrepreneurship is characterized by the use of internal or external corporate venturing to pursue innovation opportunities (Chesbrough, H., 2000).
The present study investigates on external corporate venturing and particularly on the strategic objectives of corporate venture capital (CVC). The paper is organized as follows. Firstly, we will focus on the key concepts of CVC, particularly the typology of CVC, the difference between independent venture capital (VC) and CVC and the key success and failure factors specific to CVC. Secondly this paper will analyze the role of CVC pursuing strategic objectives for parent corporations. At last we will discuss on how the nature of Parent Corporation is influencing the decision to invest in new venture.
We will discuss on the strategic objectives industrial corporations are pursuing by investing in new venture operating in the same industrial sector. Our methodology will be based on a database analysis (VentureXpert of Thomson Financial database). Our objective is to analyze the relationship between the nature (industry sector) of the parent corporation, the nature (industry sector) of the new venture, the stage of the new venture and if the parent corporations are syndicating their investment or not. At last we will discuss on the potential strategic objectives parent corporations are pursuing.
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