Research On The Value Creation Mechanism And Information Dilemma Of Corporate Venture Capital (CVC)

Since the internet bubble burst, China's venture capital (VC) market has experienced a round of adjustment and now has taken on a new look of prosperity. In 2006, the total investment in mainland China reached a peak of $1,778 billions and China VC market has the potential to become the second largest VC market in the world.The capital structure of China VC market is obviously different from those of foreign countries: in America and Europe, independent venture capital (IVC, namely traditional venture capital) is the most important source of VC; But in China, despite the short history, corporate venture capital (CVC) has contributed over half of the total amount, and some non-financial corporations have been the major participants in the VC market. The emergence of CVC was later than IVC for almost 20 years, and there is also a wide gap between research on CVC and IVC. The little attention that domestic researchers put to CVC can't match the important role that corporate investors are playing.According to some empirical studies on CVC activities, the performance of CVC is at least as good as that of IVC and corporation investors also improved their internal innovation rate through CVC investments. But in China, the performance of domestic VC is unfavorable. Just under this background, the author chooses CVC as her research topic, and the research contents mainly focus on CVC's value creation mechanism and the information disclosure dilemma between corporate investors and entrepreneurs. The major contents are arranged as follows:In chapter 2, the author gives a literature review. According to research perspectives and contents, existing researches are sorted into different topics and each topic is reviewed. Some further research directions are pointed out after the author gives a comment from the researches' quantity, contents and methods.In chapter 3, the development of CVC is introduced. First, the three waves of overseas CVC activities is described, and then the author focuses on the history and actuality of domestic CVC and discusses the policy background of CVC's emergence, multinational corporations' CVC activities in China and Chinese public companies' CVC activities. Chapter 4 detects CVC's value creation mechanism and obstacles. Corporate investors often have clear strategic objectives when they make investments so CVC's value creation mechanism is different from other kinds of investment that only pursue financial return. This special value creation mechanism is named as "dual-type and dual-direction value creation process". "Dual-type" refers to financial and strategic value, and "dual-direction" refers to creating value for both corporate investors and entrepreneurs. The discussion of CVC's value creation process is mainly based on resource-based view, and Lucent's case study gives some further evidences. At last, the obstacles of value creation are recognized and the author finds most obstacles arise in CVC are relative to the same problem-the dilemma of information disclosure.Chapter 5 focuses on the dilemma of information disclosure. First, the dilemma's emergence, probability is discussed from two dimensions, which are corporate investors' strategic objectives and the relationship between venture's innovation and incumbents' products and R&D. Then, the dilemma's formation and its effect are analyzed. At last, with reputation model and replicator dynamics model, the author investigates the effects of reputation mechanism and intellectual property (IP) protection on the information disclosure dilemma.Chapter 6 works on the effects of co-investment on CVC value creation. The co-investment phenomena and corporation investors' special rationales for syndication with independent venture capitalists are discussed first. And then the author concludes the syndication of CVC and IVC can make effect on CVC value creation in two ways: on one hand, complimentary resources and knowledge of tow kinds of investors can promote the ventures' success, on the other hand, corporate investors can send a signal to entrepreneurs through co-investment and the signal can help to resolve the information disclosure dilemma.