The Corporate Venture Capital Exit Decision

Hannes Maxin ()

VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association

Abstract: 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.

Keywords: Corporate Venture Capital; Venture Capital; Exit; Complementarity; IPO; Trade Sale (search for similar items in EconPapers)
JEL-codes: G24 M13 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cfn and nep-ent
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181647

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