Ventures Save the Corporation: Effect of Corporate Performance on Corporate Venture Capital Investment
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School of Business |
Bachelor's thesis
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Authors
Date
2017
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Degree programme
Rahoitus
Language
en
Pages
28
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Abstract
The objective of this bachelor’s thesis is to study the effect of performance feedback on corporate venture capital intensity. Corporate venture capital (CVC) is defined as equity investments by established firms in independent entrepreneurial ventures. Performance feedback, on the other hand, is rooted in the behavioral theory of the firm and depicts the difference of corporate performance relative to an aspiration level. It is hypothesized that as performance relative to aspiration level decreases, CVC intensity increases and that this effect is more significant for firms performing below their aspirations than for firms performing above their aspiration. Additionally, the effect of increasing organizational slack is expected to be positive for CVC intensity. The results of the regression model are not found to support the hypotheses on performance feedback. Rather, there is partial support for a contradictory claim that increasing performance increases CVC intensity. Increasing organizational slack, on the other hand, is found to increase CVC intensity to some degree. The robustness checks done with alternative performance variables as well as industry- and year-fixed effects show similar results to the core regression. The contradictory results can possibly be explained so that firms with poor performance feel threatened and, thus, forgo alternative solutions such as CVC investments and instead stick to solutions retaining status quo. Alternatively, the used performance measures might be too broad regarding CVC activity and lead to ill-defined problems preventing the identification of CVC as a potential solution.Description
Thesis advisor
Onal, BunyaminKeywords
corporate venture capital, behavioral theory of the firm, performance feedback, slack