Financing knowledge-intensive enterprises: evidence from CVCs in the US

Since the 1990s, the importance of corporate venture capital (CVC) programs has grown around the world. CVCs are investments that established firms make in entrepreneurial companies. At the most basic level, CVC describes an equity investment made by a corporation or its investment entity in a high growth, high potential, privately held business. There is no systematic evidence that corporate venture capital investments create value for the investing firms. Firm value, however, can be created as a result of other benefits from investing (e.g., accessing a new technology). These considerations can explain why many firms currently choose to operate venture units: They have recognized the importance of CVC for strategic innovation in addition to its potential to generate financial returns. Some evidence from the US context described in this paper supports this intuition