Strategic effects of corporate venture capital investments

• Driving or enabling deals are strategically beneficial to the corporate investor.
• Emerging and passive deals are strategically detrimental to the corporate investor.
• The vast majority of deals made by corporate investors in startups are passive.

This paper analyzes the strategic effects of corporate venture capital investments. Specifically, by studying the deals of 163 corporations over a four-year period, it documents the effects of driving, emerging, enabling, and passive investments on the pool of innovative opportunities available to incumbents and the scale efficiency gains they experience as a result of these investments. The study suggests that by making driving and enabling investments, incumbents position themselves in the industry to take advantage of increased pools of innovative opportunities and improve scale efficiency yields. At the same time, emerging and passive investments are detrimental for both of the strategic goals considered in this paper.