Corporate Venture Capital And Bilateral Enterprise Technology Innovation

Innovation and development of enterprises cannot be achieved without the dual support of financial capital and physical resources.As an important capital element for innovation in the real economy,corporate venture capital is a cross-border channel for large enterprises to make small-scale equity investments in startups in an uncertain environment to acquire external innovation knowledge,and an investment and financing method to realize the effective combination of technology,capital,talent,management and other innovative elements with enterprises.Compared with traditional venture capital institutions,corporate venture capital with its diversified strategic objectives has become an innovative form of investment organization more suitable for fueling long-term and underlying source innovation.In practice,corporate venture capital not only plays a key role in building the innovation ecology of startups,but also adds new momentum to the transformation and upgrading of large enterprises,promoting a shift in driving forces for China’s economic growth.However,unlike the free and efficient venture capital market in the West,China is in the stage of transition and emerging market economy development.The corporate venture capital industry is developed in the context of rapid development of Internet technology and high macroeconomic growth,where the parent company places more emphasis on the export of superior resources to achieve strategic synergy with the startups and gain high market share.In this context,from the Chinese institutional background,the exploration of value co-creation and mutual benefit between parent companies and investee startups linked by corporate venture capital units is the key to the research in corporate venturing,which can provide insights for parent companies,startups,venture capital institutions and regulators.The existing literature has explored in depth the individual,organizational and market dimensions of corporate venture capital,which provides a good theoretical and research methodological foundation for the study in this paper.However,there are still inconsistent findings in the existing research on corporate venture capital and innovation in parent companies and investee startups,which may be due to the differences in corporate venture capital research in different institutional environments,and the analysis of the effort motives of corporate venture capital parent companies and investee startups in the same institutional environment also leads to the differences in research on the mechanisms of innovation performance of parent companies and investee startups.Most of the studies that have been conducted are based on the logic of innovation in the knowledge-intensive manufacturing industry in the United States in the 1990s,arguing that the main purpose of corporate venturing by parent companies is to acquire technological knowledge,thus leading to an adversarial relationship between parent companies and investees.However,in the Chinese institutional context,the government and large enterprises possess more resource advantages and core technologies,and compared to startups,large enterprises are the main force of technological innovation.So in this context,it is one of the cores of the research on corporate venture capital in China to study why large Chinese companies undertake corporate venture capital investments,and explore the intrinsic mechanism of interaction between large companies’ investment in setting up venture capital institutions and their own innovation performance and even long-term value creation.In addition,the booming Chinese corporate venture capital industry in the last 20 years also provides a very good opportunity for the study of Chinese corporate venture capital in this paper.How to improve the efficiency of the interaction between parent companies,corporate venture capital units,and startups at the organizational level,to bring into play the dynamic role of corporate venture capital in the innovation growth of startups,and to accelerate the transformation and upgrading of parent companies,is the key to corporate venture capital research.In the above context,this paper analyzes the impact of corporate venture capital units on the innovation of parent companies and their investees,as well as the interaction between parent companies and investees in innovation from the perspective of multi-subject interaction,with Chinese corporate venture capital institutions as the research sample.Specifically,the paper empirically examines the role and mechanism of corporate venture capital investment on the innovation performance of parent companies based on product,technology and business model form the mechanism of corporate venture capital promoting parent company’s innovation performance(Chapter 4).Starting from the mechanism of heterogeneous combination of corporate venture capital and independent venture capital promoting technological innovation of investees in a joint investment strategy,this paper empirically examines the role and mechanism of joint venture capital structural heterogeneity as an informal compensation strategy to enhance the effectiveness of venture capital governance and promote innovation growth of startups(Chapter 5).Based on the phenomenon that a corporate venture capital unit invests in and manages multiple investees at the same time,this paper discusses the spillover effect of portfolio size on investee innovation and its impact on the innovation performance of the parent company,and explores the multiple interactions of multiple subjects(parent company,corporate venture capital unit,and startups)in corporate venturing and the value co-creation paths therein in the Chinese institutional context(Chapter 6).The main findings of this paper are as follows.First,corporate venture investments established by listed companies through equity participation and holding of subsidiaries and joint owing and operating increase the value-added activities of the parent company,thus promoting the role of corporate venture investments in stimulating technological innovation in the parent company,which is manifested in a significant increase in the number of patents.Furthermore,compared to non-SOEs,the role of corporate venture capital in enhancing the innovation performance of parent companies is stronger in SOEs.Moreover,as the intensity of corporate entrepreneurial investment increases,the innovation performance of the parent company can be converted to a greater extent into its long-term value creation,which is manifested as a significant increase in the future financial performance of the company.Through the mechanism test,it is found that corporate venture capital investment promotes the value addition of the parent company in terms of product,technology and market,which is reflected in the diversification of the parent company’s products,the diversity of its technological knowledge and the innovation of its business model,which brings about an increase in the innovation performance of the parent company.Second,the innovation performance of co-investment firms with both corporate venture capital and independent venture capital co-ownership is higher,which is reflected in the increase in the number of patents.Mechanism tests show that there is a double introduction effect of the heterogeneous combination of corporate venture capital and independent venture capital.On the one hand,the structural heterogeneity of joint venture capital teams mitigates the short-sighted behavior of venture capital,enhances the joint investment’s tolerance for failure in innovation activities,and strengthens firms’ willingness to innovate.On the other hand,it promotes the flow of experience and resources among different investment agents and enhances the expertise of the venture capital team,thus effectively breaking the boundary barriers and stimulating the innovation potential of firms.The extended study finds that the heterogeneous combination of corporate venture capital and independent venture capital has a greater effect on the technological innovation of investees when the shareholding ratio of each investment institution is lower and when non-government background venture capital institutions lead the investment.Third,portfolio size in corporate venture capital investment decisions enhances the role of corporate investors in promoting firms’ innovation output and promotes technological innovation in investees,which is manifested as an increase in the number of patents.The mechanism behind this is that,on the one hand,portfolio size enriches corporate venture capital institutions’ access to information,experience and expertise,enhances corporate investors’ governance efficiency in investees’ innovation,and in particular,more effectively helps investees establish technological ties and strategic synergies with their parent companies,effectively stimulating and nurturing investees’ technological innovation.On the other hand,portfolio size also influences the behavior of startup entrepreneurs and increases the interactions among the investees.In particular,when the industry or geographical concentration of the portfolio is high,the investees are more likely to reach a relational network,realize resource exchange and information sharing,and promote the innovation output of the companies to a certain extent.Further research has found the spillover effect of portfolio size on the technological innovation of investees,helping the parent company to acquire new resources,knowledge and opportunities more effectively and create value for its innovation performance.The innovations in this paper are mainly in the following three areas.First,it examines the mechanism of the impact of corporate venture capital investment on the innovation performance of the parent company and its long-term value creation from a value chain value-added perspective.The existing research on corporate venture capital and the strategic effect of the parent company is mainly from the perspective of external new technology knowledge acquired by the parent company.For example,in the process of investing in startups,the behavior of the parent company and the corporate venture capital investment decision will affect the new technological knowledge acquired by the parent company,hus influencing the parent company’s own internal innovation activities and external investment expansion.This paper,on the other hand,expands the possible effects of corporate venture capital on the product market,technological knowledge and business model innovation of parent companies from the Chinese institutional context,thus complementing the mechanism of corporate venture capital’s effects on parent companies’ technological innovation and long-term value creation in emerging market economies.Therefore,the research in this paper enriches and completes the study of the strategic effects of corporate venture capital on parent companies on the one hand,and provides a basis for decision making in the development of the corporate venture capital industry on the other hand.Second,this paper investigates the role and mechanism of corporate venture capital investment’s influence on the innovation of investees from the perspective of corporate venture capital decision making.The innovation and growth of startups cannot be achieved without the support of both financial capital and physical resources.Corporate venture capital has become an indispensable part of the innovation ecology of startups.How to bring into play the effectiveness of corporate venture capital decision-making and improve the value-added efficiency of corporate venture capital in the innovation services of investees?There have been rich studies on the number,amount,and portfolio diversity of corporate venture capital,with inconsistent findings,which is due to the complexity of data and differences in institutional environments.This paper investigates the dual introduction effect of joint holdings of corporate venture capital and independent venture capital from the perspective of the structural heterogeneity of joint venture capital and portfolio size,as well as the spillover effect of portfolio size on the innovation of investees based on resource-based theory and agency theory.The research in this paper enriches the research on corporate venture capital decision making and provides insights for venture capital institutions,startups and regulators.Third,from the perspective of multiple subjects(parent company,corporate venture capital unit,and startups)of corporate venture capital activities,this paper sorts out the transmission mechanism and value realization paths among multiple subjects of corporate venture capital.Corporate venture capital is funded by the parent company to set up a venture capital unit,thereby exporting capital,resources and management to achieve its own value enhancement and momentum transformation.The invested startups aim to achieve their own innovation development and rapid growth,while providing new technologies,resources and opportunities for the parent company,which constitutes a circular organization of value creation and value sharing among the parent company,the corporate venture capital unit and the startups.The existing studies mainly focus on the "single entity" of corporate venture capital,or the"competitive relationship" between the parent company and the invested company,ignoring the multiple entities driving corporate venture capital,especially the value sharing process between the parent company and the invested company.In this paper,the value realization paths of corporate venture capital and parent companies,corporate venture capital and investees,and parent companies and investees are further sorted out to provide insights for the transformation and upgrading of large enterprises and the innovation growth of startups,and to provide a theoretical basis for the organic integration of the innovation and entrepreneurial value chain of large and small enterprises and the construction of a productive and dynamic innovation ecosystem.In 2018,the "Opinions of the State Council on Promoting the High-Quality Development of Innovation and Entrepreneurship and Creating an Upgraded Version of ’Entrepreneurship and Innovation among All the People’" clearly proposed to achieve "the organic integration of the innovation and entrepreneurship value chain of large and medium-sized enterprises".Large and medium-sized enterprises,with corporate venture capital(CVC)as a means,have become the main force in promoting the high-quality development of innovation and entrepreneurship,and have played an important role in the construction of the innovation ecology of startups and the transformation and upgrading of large enterprises.The findings of this paper suggest that,first,in efficiency-driven Chinese entrepreneurial activities,regulators should guide a virtuous cycle among corporate venture capital institutions,parent companies and invested companies to promote the integrated development of large and medium-sized enterprises and realize the value co-creation of multiple subjects.Besides,in the transition and emerging market economy,the development of the company’s venture capital industry requires not only the improvement of the tripartite system of large companies,venture capital units and start-ups,but it is also equally important to strengthen functional cooperation among venture capital institutions.In particular,the introduction of independent venture capital institutions will enhance the catalytic effect of corporate venture capital on corporate innovation.Finally,deepening the key role of corporate venture capital in the innovation ecosystem of startups also requires improving the efficiency of resource allocation of capital elements and the efficiency of corporate venture capital services in terms of corporate venture capital decisions.The research in this paper has implications for improving the effectiveness of corporate governance of corporate venture capital as a capital element,promoting the transformation and upgrading of large enterprises and the innovative development of small and medium-sized enterprises,improving the efficiency of the interaction between corporate venture capital,parent companies and startups,and building a productive and dynamic innovation ecosystem.