Corporate Venturing Deal Syndication and Innovation: The Information Exchange Paradox

Sergey Anokhin, Daniel Örtqvist, Sara Thorgren, Joakim Wincent

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

Many incumbent corporations make equity investments in young technological start-ups to enhance their innovation effectiveness, and the great majority syndicate at least some of their investments with other incumbents. While syndication is generally held to benefit incumbent corporations, this study demonstrates that it may also be detrimental to corporate innovation, by elaborating the notion of an information exchange paradox - essentially, that information exchanges within CVC networks must, somehow, be both open and closed at the same time. Corporations must try to appropriate the knowledge championed by their investees and fellow-investors, but also protect their own know-how from leaking to competitors. Unlike prior CVC research, we demonstrate that knowledge sharing in open innovation forums may be counterproductive. Using a unique data set of the investment decisions made by 163 corporations over four years we show that, for some, participating in syndicate networks may involve losses that outweigh their gains. Our analysis establishes two key findings. First, corporations need to consider the trade-off between the number of ventures they support and the position they take in their syndication networks. The best strategies appear to be maximizing isolationist (supporting many ventures but staying away from the network centre) or minimizing centralist (supporting few ventures, but occupying a central network position) - the other two options (maximizing centralist and minimizing isolationist strategies) are far less effective in converting CVC investments into corporate innovation. Second, this picture is particularly applicable to highly concentrated industries dominated by several powerful incumbents: in fragmented industries these strategy differences are far less pronounced, so the choice of CVC syndication strategy will depend on other considerations. This supports a contingency view of syndication, implying that ensuring incumbent corporations really benefit from equity investments in start-ups is a not a trivial task for their managers.

Original languageEnglish
Pages (from-to)134-151
Number of pages18
JournalLong Range Planning
Volume44
Issue number2
DOIs
Publication statusPublished - 1 Apr 2011
Externally publishedYes

Fingerprint

information exchange
corporation
innovation
equity
industry
trade-off
know how
contingency
investor
Corporate venturing
Incumbents
Paradox
Information exchange
Innovation
Syndication
manager
Venture
knowledge
Corporate innovation
Start-ups

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Finance
  • Strategy and Management

Cite this

Corporate Venturing Deal Syndication and Innovation : The Information Exchange Paradox. / Anokhin, Sergey; Örtqvist, Daniel; Thorgren, Sara; Wincent, Joakim.

In: Long Range Planning, Vol. 44, No. 2, 01.04.2011, p. 134-151.

Research output: Contribution to journalArticle

Anokhin, Sergey ; Örtqvist, Daniel ; Thorgren, Sara ; Wincent, Joakim. / Corporate Venturing Deal Syndication and Innovation : The Information Exchange Paradox. In: Long Range Planning. 2011 ; Vol. 44, No. 2. pp. 134-151.
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