Corporate venture capital and interfirm rivalry: A competitive dynamics perspective

This study views corporate venture capital (CVC) investment as a form of inter-firm rivalry. Adopting a competitive dynamics perspective, we argue that when a focal corporate investor invests in an entrepreneurial venture, that investment sends important competitive signals to its rivals, thereby increasing their likelihood of initiating a matching response. We theorize how three factors characterizing such investment—the amount of funding, industry relatedness between the corporate investor and the entrepreneurial venture, and the reputation of the corporate investor—can influence rivals' awareness of competitive threat, their motivation to respond, and therefore their likelihood of launching a matching counterattack. Our results demonstrate substantial support for our theoretical model.