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

49 Pages Posted: 3 Aug 2015 Last revised: 15 Jan 2023

See all articles by Marco Ceccagnoli

Marco Ceccagnoli

Scheller College of Business at Georgia Tech

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy; National Bureau of Economic Research (NBER); Max Planck Institute for Innovation and Competition

Hyunsung D. Kang

Georgia Institute of Technology - College of Management; Adelphi University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 2015

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.

Suggested Citation

Ceccagnoli, Marco and Higgins, Matthew John and Kang, Hyunsung D. and Kang, Hyunsung D., Corporate Venture Capital as a Real Option in the Markets for Technology (July 2015). NBER Working Paper No. w21424, Available at SSRN: https://ssrn.com/abstract=2638975

Marco Ceccagnoli (Contact Author)

Scheller College of Business at Georgia Tech ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy ( email )

1655 East Campus Center Dr.
Salt Lake City, UT 84112
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

Hyunsung D. Kang

Adelphi University - School of Business ( email )

Garden City, NY 11530
United States

Georgia Institute of Technology - College of Management ( email )

800 West Peachtree Street, N.W.
Atlanta, GA 30308
United States

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