Tapping into the knowledge of incumbents: The role of corporate venture capital investments and inventor mobility

• Date: 01 March 2019
• Author: Vareska van de Vrande,Francesco Di Lorenzo
• Published date: 01 March 2019
• DOI: http://doi.org/10.1002/sej.1304

RESEARCH ARTICLE

Tapping into the knowledge of incumbents:

The role of corporate venture capital investments

and inventor mobility

Francesco Di Lorenzo

1

| Vareska van de Vrande

2

1

Department of Strategy and Innovation,

Copenhagen Business School, Frederiksberg,

Denmark

2

Department of Strategic Management and

Entrepreneurship, Rotterdam School of

Management, Erasmus University, Rotterdam,

Netherlands

Correspondence

Francesco Di Lorenzo, Department of Strategy

and Innovation, Copenhagen Business School,

Kilevej 14, 2000 Frederiksberg, Denmark.

Email: fdl.si@cbs.dk

Research Summary:This article investigates the impact of corporate

venture capital (CVC) investments and inventors' mobility on the

extent to which new ventures use incumbents' knowledge

resources as inputs for their innovation activities. Our findings sug-

gest that ventures receiving CVC investments draw less on inves-

tors' knowledge, while inventor mobility increases the extent to

which an incumbent's technological knowledge is used by recipient

ventures. Ventures combining CVC investments and inventor

mobility from the same incumbent are selected for drawing less on

that incumbent's patents, but these citation flows increase in the

period after investment and the inventors' hiring events are com-

bined. Our results, thus, unveil the organizational complexity asso-

ciated with the individual and combined roles of CVC investments

and inventor mobility in determining new ventures' innovation

behaviors.

Managerial Summary:New ventures often acquire resources from

large established firms to foster development and success. Among

others, research has primarily focused on equity investments—

corporate venture capital and the hiring of employees—in particular

inventors. While prior work has studied the impact of these two

resources in terms of success and performance, we look more spe-

cifically at whether these two particular resources, individually and

combined, could function as channels through which new ventures

can access and use established firms' knowledge assets. Our ana-

lyses suggest that ventures receiving CVC investments draw less

on investors' knowledge, while those hiring inventors draw more.

Ventures combining these resources show an increased use of the

incumbent firm's knowledge assets in the period after investment

and hiring are combined.

KEYWORDS

corporate venture capital, inventor mobility, knowledge flows,

new ventures, patents

Received: 20 May 2016 Revised: 24 July 2018 Accepted: 5 September 2018 Published on: 24 October 2018

DOI: 10.1002/sej.1304

24 © 2018 Strategic Management Society wileyonlinelibrary.com/journal/sej Strategic Entrepreneurship Journal. 2019;13:24–46.

1|INTRODUCTION

New ventures often build on the technologies of incumbent firms when innovating (Kim, Steensma, & Park, 2017).

Prior studies have acknowledged the importance of both CVC investments (Hallen, Katila, & Rosenberger, 2014;

Katila, Rosenberger, & Eisenhardt, 2008; Souitaris & Zerbinati, 2014) and human capital (Agarwal, Audretsch, &

Sarkar, 2007; Agarwal, Echambadi, Franco, & Sarkar, 2004; Colombo & Grilli, 2005, 2010; Franco & Filson, 2006;

Gilbert, McDougall, & Audretsch, 2006) for the development, growth, and success of new ventures. In particular,

scholars have highlighted CVC and employee mobility as two main channels through which new ventures can tap

into the knowledge of incumbent firms and improve their performance (Agarwal et al., 2004, 2007; Almeida, Dokko, &

Rosenkopf, 2003; Alvarez-Garrido & Dushnitsky, 2016; Basu, Sahaym, Howard, & Boeker, 2015; Pahnke, Katila, &

Eisenhardt, 2015; Park & Steensma, 2013). Despite the recognition of these two channels as vehicles for accessing

knowledge embedded in incumbent organizations, there are two main caveats to the current literature. First, CVC

investments and employee mobility have been considered mainly in isolation. In this article, therefore, we investigate

the extent to which new ventures draw on incumbents' knowledge when developing new innovations as a result of

CVC investments, mobility events, and the combination of the two. Second, scholars have so far focused primarily on

ventures' overall performance implications, leaving us with little guidance on whether CVC investments and

employee mobility actually represent channels for ventures, when innovating, to access and use incumbents'

knowledge resources. In this article, we also explore this new venture behavior.

An understanding of whether and to what extent ventures access and use incumbents' resources is important

because although new ventures are often praised for their organizational agility and innovativeness, they are likely to

be constrained in terms of the productive assets that are available to them, which ultimately threatens their chances

of survival and growth (e.g., Barringer, Jones, & Neubaum, 2005). In fact, not all ventures have the resources needed

to seek, manage, and leverage successfully corporate investors (Dushnitsky & Shaver, 2009) and/or engage in costly

hiring activities (Blatter, Muehlemann, & Schenker, 2012; Coad, Daunfeldt, Johansson, & Wennberg, 2014; Dahl &

Klepper, 2015), which creates decisional trade-offs for new ventures in allocating their limited resources to capture

such opportunities. Thus, we take a question-driven approach and ask how CVC investments and employee mobility

can represent, individually and jointly, opportunities to tap into incumbents' knowledge assets.

We address this issue by studying new ventures active from 1992 to 2005. In our exploration of the effects of

CVC investments and inventor mobility on new ventures' use of incumbents' knowledge, we focus on Intel as a pri-

mary incumbent. Intel is a dominant player in the semiconductor industry, and both the industry and the company

have been the subject of a number of studies on inventor mobility (Agarwal, Ganco, & Ziedonis, 2009; Corredoira &

Rosenkopf, 2010; Ganco, Ziedonis, & Agarwal, 2014; Moore & Davis, 2004; Song, Almeida, & Wu, 2003). Moreover,

Intel is one of the largest, most active CVC investors of all time—since 1991, it has invested more than $12 billion in

equity of more than 1,500 companies.

1

These characteristics make Intel an interesting setting for this article. More-

over, a single-firm study increases the reliability and accuracy of the data, while minimizing the risk of unobserved

confounding factors at the firm level. Other studies in the CVC and mobility literature have also developed their

empirics based on a single corporation, such as Xerox (Chesbrough, 2003; Cirillo, Brusoni, & Valentini, 2013) or IBM

(Palomeras & Melero, 2010).

By exploring the extent to which new ventures draw on incumbent firms' knowledge and the role that CVC

investments and inventor mobility play in that process, our research makes two main contributions to the extant lit-

erature. First, our study contributes to the literature on new ventures' innovative capability. Prior research has

acknowledged the importance of ties with incumbent firms for the development and performance of new ventures

(Alvarez-Garrido & Dushnitsky, 2016; Kim et al., 2017; Pahnke, Katila, et al., 2015; Pahnke, McDonald, Wang, & Hal-

len, 2015). We extend these studies by showing the impact of CVC investments and employee mobility on the extent

1

http://www.intelcapital.com/asset/docs/Intel-Capital-Backgrounder.pdf

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