Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Innovation and R&D I F08-V1
This paper investigates an entrepreneur who decides whether to obtain funds from an independent venture capital firm (IVC) or a corporate venture capital firm (CVC) to develop an innovative product. In case of success, the entrepreneur enters a market and competes with an incumbent. The CVC is a subsidiary of an input producer. This input will be required by both the entrepreneur and the incumbent to produce their products. I analyze three different exit routes: (1) IPO, (2) Trade Sale via incumbent and (3) Trade Sale via input producer. I show that the CVC does not exit via a Trade Sale to its parental company due to a loss of demand for the input good. Moreover, I find that the IVC exits more innovative ventures more likely via an IPO, in comparison with the CVC. The analysis generates a number of empirical implications for the difference between IVCs and CVCs and the link between CVCs and the Trade Sale decision of their parental companies.
Corporate Venture Capital Venture Capital Exit Complementarity IPO Trade Sale