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Int J Fin Econ - 2023 - Shuwaikh - Investment decisions under uncertainty Corporate venture capital as a real option.pdf (1.29 MB)

Investment Decisions under Uncertainty: Corporate Venture Capital as a Real Option

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posted on 2024-01-23, 11:28 authored by F Shuwaikh, Mathew Hughes, S Brinette, S Khemiri

This paper aims to assess the role of corporate venture capital (CVC) as option-creating investments and how corporate investors practice CVC options in their investment decisions. Using a sample of 4206 US firms between 1998 and 2019, our results show that sector fit and geographic fit reduce uncertainty and impact investors’ decisions on CVC investments. When exogenous uncertainty is mitigated, CVC-backed companies experience higher investment amounts than independent venture capital funds (IVC)-backed ones. The results evidence that follow-on investments motivate IVC-backed companies to exit via IPOs. At the same time, a prolonged duration for the organizational learning option leads CVC-backed companies to exit via acquisition. This study helps investors to reduce uncertainty surrounding investments and improve the usefulness of their real options. We also provide implications for how policymakers target and develop an entrepreneurial ecosystem.

History

Author affiliation

School of Business, University of Leicester

Version

  • VoR (Version of Record)

Published in

International Journal of Finance and Economics

Publisher

Wiley

issn

1076-9307

Copyright date

2023

Available date

2024-01-23

Language

en

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