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Corporate Venture Capital and Firm Scope

Published online by Cambridge University Press:  20 November 2023

Yifei Zhang Open the ORCID record for Yifei Zhang [Opens in a new window]
Yifei Zhang*
Affiliation:
Peking University HSBC Business School
*
[email protected]
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Abstract

This study examines whether and how corporate venture capital (CVC) spurs changes in firm scope. Using two text-based measures of firm scope, I provide evidence that CVC investments are strongly correlated with subsequent changes in firm scope among CVC parent firms, including seeding emerging businesses and creating new segments or divisions. Further evidence is consistent with an experimentation view, with more promising ventures having a stronger strategic impact on the scope changes of parent firms. Moreover, the study finds that post-CVC scope changes are primarily built internally and rarely involve killer acquisitions. These changes create value for CVC parents.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , First View , pp. 1 - 38
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

I thank the anonymous reviewer and Jarrad Harford (the editor) for their helpful suggestions. I am indebted to Ulrich Hege for his guidance and suggestions. I also thank Rustam Abuzov (discussant), Milo Bianchi, Patrick Coen, Florian Ederer, Caroline Genc (discussant), Di Li, Baixiao (Tony) Liu, Song Ma, Andrew Metrick, Sophie Moinas, Filip Mrowiec, Sebastien Pouget, Armin Schwienbacher (discussant), Merih Sevilir (discussant), Guillaume Vuillemey (discussant), Dong Yan (discussant), Xiang Zheng (discussant), and conference and seminar participants of 2021 Eastern Finance Association, 2021 European Finance Association – Doctoral Tutorial, 2021 WEFI Student Workshop, 2022 American Finance Association, 2022 MFA, and 2022 European Finance Association for their helpful comments. All errors are mine.

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