Corporate Governance in Entrepreneurial Firms: Effects of Corporate Venture Capital and Founders

Abstract

R&D strategy is one of the most important resource allocation decisions that investors and top-level managers make, and it is particularly important for young entrepreneurial firms in technology-intensive industries. Although prior studies have examined how different types of ownership affect R&D strategy in large public corporations, we still know little about corporate governance–related determinants of R&D strategy in young entrepreneurial firms. To fill this research gap, we focus on the most significant stakeholders in young entrepreneurial firms (i.e., venture capital firms, corporate venture capital firms, and founders) and argue that CVC ownership and founder incumbency positively affect R&D strategy in entrepreneurial firms. Our empirical analysis correcting for selection bias and reverse causality supports our hypotheses.