Balancing stakeholders to the right point
Research Paper Title:
“Progress toward understanding tensions in corporate venture capital: A systematic review”
Authors:
Background:
Corporate venture capital (CVC)’s equity investments made by established firms in entrepreneurial startups is an important phenomenon that is rife with tensions. Despite the accumulation of research on CVC, the progress made toward understanding these tensions has not been reviewed yet. Reviewing this research is important because it adds to our understanding of why, how, and when contradictory goals and multiple stakeholder expectations influence stakeholders’ behaviors and CVC performance and how these tensions can be managed to produce positive outcomes.
Highlights:
The authors identify three main tensions in corporate venture capital (CVC).
CVC-based exploration and core business-focused exploitation are both championed by multiple stakeholders.
CVC programs simultaneously belong to the corporate and the startup/VC world.
CVC programs pose both threats and opportunities for startups and VCs.
The authors propose the paradox perspective to better understand and manage tensions in CVC.
Methodology:
Number of studies: 1
Sample description: peer-reviewed articles
Sample size: 111
Hypothesis:
No hypotheses or propositions
Results:
The study inductively identified three main tensions: (1) multiple stakeholders championing CVC-based exploration versus core business-focused exploitation, (2) CVC programs simultaneously belonging to the corporate parent versus the startup/venture capital (VC) world, and (3) startups and VCs viewing CVC programs as a threat versus an opportunity.
CVC literature has shifted, at least partially, from the tensions stemming from CVC-based exploration vs. core business-focused exploitation to when such tensions become salient or latent and influence CVC investing decisions. Furthermore, the research has increasingly focused on the perspectives of external stakeholders such as portfolio startups, independent VCs, peer corporations, shareholders, and financial analysts, and internal stakeholders such as senior managers, business units, R&D units, and other corporate development units (e.g., alliance and acquisition units); with this shifting attention, our understanding has rapidly evolved with regard to the identity and behavior of CVC programs in the complex interfaces between the corporate parent vs. startup/VC worlds as well as the potential opportunities vs. threats posed by CVC programs to startups and co-investors.
For some second-order tensions such as CVC as a strategic and financial tool vs. a risky and costly tool (corporate perspective), CVC as a complementary and essential tool vs. a disruptive and risky tool (internal stakeholder perspective), CVC capabilities and networks vs. corporate capabilities and networks (CVC program perspective), CVC as a value-adding investor vs. risk of misappropriation (startup perspective), and CVC as a value-adding co-investor vs. a bureaucratic and opportunistic co-investor (VC perspective), the literature discussed how to manage and cope with those tensions. On the other hand, other second-order tensions such as pressure to adopt CVC for long-term innovation and growth vs. abandon CVC to achieve short-term profitability (external stakeholder perspective) and rules of the game vs. corporate policies and structures (CVC program perspective), the literature has been silent on the management of the tensions.
Conclusion:
Motivated by the increasing scholarly interest in CVC and the complex nature of the phenomenon that is full of tensions, this study conducted a systematic review to assess the progress made toward understanding the tensions in CVC and to identify avenues for future research. In doing so, the review contributes to the literature by introducing the paradox lens to the research on CVC, which as a context, is full of tensions. The paradox lens and related approaches used in this research can improve the understanding of various tensions that occur at multiple levels and interfaces in CVC, how they can be analyzed, managed, and coped with, and what the outcomes are. By drawing on insights from the paradox literature, the authors propose the identified tensions to be evaluated as paradoxical tensions and highlight opportunities for future research on the tensions in CVC that the review identified and those that are still underexplored. Finally, the authors highlight CVC as a promising and fruitful context for the further development of the theoretical understanding of tensions and paradoxes in organizational research. The authors expect that the insights from their study of the tensions and paradoxes in CVC can also facilitate an improved understanding of tensions in other organizational contexts, such as internal corporate venturing, that also face multiple tensions.