SGER: Corporate Venture Capital: Fostering Innovation through Equity Investment

University Of Oregon Eugene, Eugene OR

Investigators

Abstract

ABSTRACT (SES 0120188-SGER) MEYER Principal Investigator: Alan D. Meyer, University of Oregon - Eugene Corporate Venture Capital: Fostering Innovation Through Equity Analysis: This highly innovative project proposes to investigate the emerging practice of corporate venture investing whereby corporations seek to invest in start-up ventures, often as an alternative to investment in in-house R&D. Externalizing R&D can take the form of R&D alliances and research consortia, but a growing share of corporate R&D dollars has been devoted to equity investments in start-ups, the focus of this research. Corporations seek both financial returns and strategic benefits, including exposure to new and disruptive technologies, access to new products, and identification of propsective acquisition targets. While independent venture capital has been highly successful, however, corporate venturing has been more challenging. Levels of equity investment fluctuate with economic cycles, so many firms started venturing units only to close them down when economic times turned tough. Much of the knowledge upon which independent VC firms prosper is tacit, and some of their central practices clash with corporate cultures and systems within which the corporate venture efforts are embedded. The research objectives of this project include: Contentualize corporate venturing by conducting an historical analysis of corporate venture investment (CVI) programs. Evaluate the transferability of practices developed by private VC firms into CVI units; Develop a typology of alternative organizational structures being used to house and pursue CVI; Conduct a real-time longitudinal analysis of the rapid coevolution of CVI units and the venturing environment; Identify best practices for corporate venturing. Cooperation has been arranged with Atrium Capital, IBF (International Business Forum), Allegis Capital, Sun Microsystems, 3M Enterprise Development, Compaq Computer Corporate Development, Adobe Systems, and Intel. There exists no other work examining this emerging area of corporate innovation, nor any comparing internal versus independent venture capital. In light of extensive outsourcing of R&D, information as to the potential for this practice as well as its hazards seems highly likely to yield interesting insights of theoretical and practical impact. In the judgment of the Program Director, the cooperation of these corporations and the track record of the researcher argues strongly for important contributions from this Small Grant for Exploratory Research.