The strategic use of corporate venture financing for securing demand
Riyanto, Y.E. Schwienbacher, A.
Schwienbacher, A.
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Abstract
This paper focuses on the strategic role of corporate venture financing carried out by a corporation (a headquarter). When the headquarter finances a venture through its corporate venture-financing arm, it can increase the complementarity between products of the venture and the headquarter. The effect of having an increase in complementarity is a softening of ex post product market competition with rival products. Hence, in deciding whether to finance the venture, the headquarter faces a trade-off between, on the one hand, being more aggressive ex post in the product market, and, on the other hand, using venture financing to soften ex post competition with substitute products. © 2006 Elsevier B.V. All rights reserved.
Keywords
Corporate finance, Entrepreneurship, Innovation, Link between product market and financial market, Venture capital
Source Title
Journal of Banking and Finance
Publisher
Series/Report No.
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Date
2006
DOI
10.1016/j.jbankfin.2005.11.005
Type
Article