Heejin Woo’s research while affiliated with California State University, Fullerton and other places

Corporate venture capital (CVC) investment has increasingly become an important source of entrepreneurial finance. Accordingly, while scholars have traditionally focused on understanding the main motivations behind CVC activity and its impact on the investing corporate firm, more recently, scholars have also started to emphasize the importance of understanding the impact of CVC investment on the investee venture. In particular, these recent studies commonly show that CVC investment has a positive effect on the venture’s innovation. While the positive link between CVC investment and the venture’s innovation output is well established in the literature, the organizational mechanisms through which this relationship unfolds within the venture remain relatively underexplored. In this study, we fill this gap in the literature by examining the effects of CVC ownership, founder incumbency, and the CVC investor–founder interaction on research and development (R&D) investment strategies in venture capital (VC)-financed, technology-based entrepreneurial ventures. In doing so, we aim to provide a novel explanation of the organizational mechanisms that lead to greater investment in research and development (R&D), especially with regard to the interaction between CVC investors and founder managers. We argue that CVC ownership and founder incumbency positively affect entrepreneurial firms’ R&D investment and, more importantly, that the CVC ownership effect is effectively amplified when the founder is an incumbent top manager because of goal congruence and knowledge spillover from the CVC firm. Our empirical analysis supports our hypotheses while addressing potential endogeneity concerns. Our results also support various mechanisms by utilizing the data on CVC investor’s board membership, CVC investor heterogeneity, the founder’s technological background, and the investee venture’s industry. The online appendix is available at https://doi.org/10.1287/orsc.2017.1133 .

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.

R&D investment 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 investment strategy in large public corporations, we still know little about corporate governance-related determinants of R&D investment 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 investment strategy in entrepreneurial firms. Our empirical analysis correcting for selection bias and reverse causality supports our hypotheses.

This study examines how fluctuations in the amount of capital flowing into venture funds affect the financing of innovative startup companies and how economic downturns affect such financing. We argue that the nature of the economic downturn can cause differential effects on the investment pattern. We find that venture capital firms invest more in early-stage companies than in later-stage companies when the amount of capital flowing into the market increases. We also find that venture capital firms invest less in early-stage companies than in later-stage companies during an economic downturn associated with the real sector and that they invest more in early-stage companies than in later-stage companies during an economic downturn associated with the financial sector. This study contributes to the entrepreneurship literature by demonstrating how macroeconomic factors affect venture capital investment decisions. The study also delineates the implications of seeking market entry via venture capital financing by entrepreneurial companies.