The purpose of this article is to describe how investing in entrepreneurial ventures can help large firms pursue corporate entrepreneurship initiates. Ventures can be attractive partners due to their ability to provide a disproportionate share of radical innovations.
Based on existing literature and information collected via 45 surveys and 72 interviews, the paper shows that strategic fit is an important variable that determines the type of benefits ventures can provide to investing firms.
Three benefits large firms can reap from investing in ventures are: managing the risks and uncertainties of innovation; learning from the venture; and increasing bargaining power over ventures that supply innovative products.
Existing research does not go far enough to explain the range of benefits corporate venture capital can provide. The majority of investments were found in ventures that sell innovative products to the investing firm and have technological competences different from the investing firm.
Organizing for innovation is often a challenge for large firms. Because ventures may be more effective when started outside the firm than inside, investing in select entrepreneurial ventures can help firms effectively explore for radical innovation while continuing to exploit their existing resources internally.
For corporate strategists concerned about improving their firm's innovativeness, corporate venture capital can be part of a corporate entrepreneurship toolbox that can help augment a large firm's growth and competitive position. It can be particularly helpful in managing the risks and uncertainties inherent with radical innovation.
