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Corporate Venture Capital as a Real Option in the Markets for Technology

Marco Ceccagnoli, Matthew Higgins () and Hyunsung D. Kang

No 21424, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite the fact that one of the main goals of corporate venture capital (CVC) investments in high-tech industries is to gain a window on future technologies, the relationship between CVC investments and strategies used to acquire technologies in the markets, such as licensing, has not been adequately explored. To address this gap, we build on the real option literature suggesting that CVC investments can be used as real options in the markets for technology. Accordingly, we formulate hypotheses about key drivers of the option value of CVC investments and the decision to exercise the option. Using a longitudinal dataset based on 604 dyads formed by a sample of global pharmaceutical firms and their external technology partners, we find that corporate investors’ scientific capabilities, technological domains, research pipelines, and the resolution of exogenous uncertainty related to partner firms’ technologies impact investors’ decisions on CVC investments and ex post technology acquisition. In our research setting, the most common way to exercise the option post-CVC investment is via technology licensing.

JEL-codes: G34 L24 L65 O32 (search for similar items in EconPapers)
Date: 2015-07
New Economics Papers: this item is included in nep-cfn, nep-cse and nep-ino
Note: CF PR
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Published as Marco Ceccagnoli & Matthew J. Higgins & Hyunsung D. Kang, 2018. "Corporate venture capital as a real option in the markets for technology," Strategic Management Journal, vol 39(13), pages 3355-3381.

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