Research On The Relationship Between Economic Policy Uncertainty Perception And Corporate Venture Capital

Since the 2008 financial crisis,global economic policy uncertainty has shown a long-term upward trend and increased volatility.In particular,due to factors such as the New Champions epidemic and the conflict between Russia and Ukraine,global geopolitical and economic relations began to be reshaped,economic policies of various countries changed frequently,and the uncertainty of economic policies perceived by enterprises further increased.It is worth noting that among many types of enterprises,private high-tech enterprises are more sensitive to changes in economic policies and need to be fully prepared to cope with changes in the environment because of their dual attributes of both private enterprises and high-tech enterprises.What actions will private high-tech enterprises take when they perceive the uncertainty of economic policies? Under what circumstances will the impact of uncertainty perception of economic policy be strengthened? These issues need to be discussed in depth.In existing studies,some scholars have confirmed that economic policy uncertainty will have an important impact on enterprises’ strategic choices,investment and financing arrangements,technological innovation and other activities.However,there is still controversy about the final effect of economic policy uncertainty on enterprises,and no unanimous conclusion has been reached.On the one hand,the uncertainty of economic policies will produce negative effects,making enterprises hesitate and miss development opportunities or suffer huge losses.On the other hand,economic policy uncertainty also contains opportunities for the future development of enterprises.When enterprises effectively grasp these opportunities,they will increase the chips to win the future,and its positive role is prominent.Corporate Venture Capital(hereinafter referred to as CVC),as one of the important forms of external corporate venturing,is an effective means for enterprises to identify and seize opportunities.Previous studies mostly focus on the impact of corporate venture capital,but pay less attention to the antecedents of the implementation of corporate venture capital by incumbents.Among the relatively few antecedent studies,scholars mainly conducted preliminary exploration from the perspectives of industrial environment and organizational characteristics.From the perspective of industrial environment,although uncertainty has been included in the investigation,but the research in this context mostly discusses the uncertainty of technology and market,there is no discussion of economic policy uncertainty,let alone the direction of economic policy uncertainty on corporate venture capital.Furthermore,in recent years,more and more scholars invoke the real options theory to explain corporate venture capital behavior from the perspective of constructing real options.According to the theory of real options,enterprises can limit the downside cost and seize the upside potential by constructing real options when facing uncertainty.As a minority equity investment,corporate venture capital can be invested in stages,which can be regarded as a real option creation mechanism.It is worth noting that in the research of real options theory,the situation conditions of industry level such as investment irreversibility,market competition level and growth opportunities have been tested,while the situation variables of individual and firm level are rarely studied.In general,the research on economic policy uncertainty,corporate venture capital and real option theory has the following shortcomings: First,there is no clear conclusion on the impact of economic policy uncertainty on enterprise behavior,especially on the entrepreneurial behavior of private high-tech enterprises.Second,in the research on the relationship between uncertainty and corporate venture capital,the consideration of economic policy uncertainty is ignored,and there is a lack of research on the reasons why enterprises engage in corporate venture capital from the perspective of policies or institutions.Third,current studies on real options mostly focus on the moderating effects of industry characteristics such as market competition,irreversible level of investment and growth opportunities,ignoring the contingency effects of managers’ personal characteristics,and pay relatively little attention to enterprise characteristics.Bridging the theoretical gap is of great significance.First,as an important part of the exogenous uncertainty of enterprises,economic policy uncertainty is an important link to understand the relationship between uncertainty and enterprise behavior,so it is necessary to have a thorough understanding of its effects and mechanism.Second,as an important strategic decision of existing enterprises,corporate venture capital will undoubtedly be affected by the external environment.By constructing and testing the relationship between economic policy uncertainty and corporate venture capital and further exploring the change of the relationship between them under different boundary conditions,we can provide a more comprehensive perspective to understand the antecedents of corporate venture capital.Third,context conditions are very important for the theoretical study of real options.In the relevant research on the application of real options theory,the situational variables at the individual level and the firm level have not received sufficient attention,so the exploration from these two levels is helpful to expand the boundary conditions of real options theory.Based on this,this study focuses on the relationship between private high-tech enterprises’ perception of economic policy uncertainty and corporate venture capital decisions.Specifically,based on the real options theory,this study predicts that when private high-tech enterprises perceive a high degree of economic policy uncertainty,they tend to establish corporate venture capital projects with the nature of real options,so as to obtain strategic flexibility to deal with uncertainty.Furthermore,considering that real options decision-making cannot be separated from the subjective judgment of managers,it is also necessary to comprehensively consider the heterogeneity of enterprises.This study starts from the individual characteristics and enterprise characteristics of the CEO.As far as the individual characteristics of the CEO are concerned,from the two dimensions of time and space,the expected tenure and openness of the CEO are introduced.CEOs with a longer expected tenure are more likely to make strategic decisions from a long-term perspective,which will strengthen the demand of enterprises for strategic flexibility under uncertainty,thus promoting the startup of corporate venture capital projects.Open CEOs are more aware of and capable of real options,thus transforming the demand for strategic flexibility into entrepreneurial investment practice.As far as enterprise characteristics are concerned,the introduction of enterprise risk taking level can predict that enterprises with higher risk taking level are more willing to seize investment opportunities,have a stronger demand for strategic flexibility,and also have the ability to take risks,which can put the demand for strategic flexibility into the practice of corporate venture capital.Based on the data of 474 private high-tech listed companies in Shanghai and Shenzhen from2007 to 2017,this study uses the negative binomial regression method to verify the above theoretical assumptions.There are three theoretical contributions to this study.First,to some extent,the conflict conclusion between the existing research on the relationship between economic policy uncertainty and firm behavior is revised.The results of this study show that the relationship between EPU and enterprise behavior should be determined according to the specific type of behavior.For the gradual and tentative minority equity investment behavior such as corporate venture capital,the uncertainty of economic policy forms a clear positive impact through the strategic flexibility mechanism.Second,this study enriches the antecedents of corporate venture capital by introducing EPU.From a new perspective,this study constructs a perception index of the uncertainty of economic policies faced by enterprises,reveals the differences in the perception of uncertainty of economic policies of different enterprises,and uses it to explain the heterogeneity of different enterprises in corporate venture capital which further enriches the antecedent research of corporate venture capital.Thirdly,this study expands the situational conditions of real option theory by investigating the individual characteristics of CEO and enterprise characteristics.Based on CEO’s expected tenure,CEO’s openness and enterprise’s risk taking level,this paper reveals the internal mechanism of individual characteristics and enterprise characteristics to make real options decisions under uncertainty,thus enriching the research on real options theory.The practical significance of this study is four.First,this study provides a feasible solution for private high-tech enterprises to deal with the uncertainty of external economic policies.When private high-tech enterprises are faced with the uncertainty of economic policies,they can establish real options portfolio with the help of corporate venture capital to maintain a high strategic flexibility.Second,this study provides a basis for the selection and management of CEOs in private high-tech enterprises.In the process of CEO selection,openness can be included in the selection criteria.At the same time,enterprises need to formulate a reasonable CEO appointment period and strengthen the supervision of CEOs with shorter tenure.Third,this study provides a direction for private high-tech enterprises to strengthen their own level.Enterprises should pay attention to the relevant factors that affect the level of risk taking,and try to obtain rich core resources and key information to lay a foundation for enterprise risk taking.Fourthly,this study provides a policy reference for the government to guide the entrepreneurial investment activities of private high-tech enterprises.Considering that a certain degree of policy uncertainty is helpful to promote private high-tech enterprises to start corporate venture capital,future policy makers can flexibly use this factor to guide enterprises to increase corporate venture capital activities.