SI Seminar with Sheryl W. Smith

Entrepreneurial ventures are a major source of innovation, and increasingly they are funded by established firms that seek a 'window on novel technologies' (namely, driven by learning objective). The practice, also known as Corporate Venture Capital (CVC) investment, is adopted by a growing number of firms and has recently given rise to ventures being backed by multiple CVC investors. Why would an established firm co-invest with a competitor and risk sharing the learning potential? To that end, we expand on existing innovation studies, and proceed to investigate not only learning objectives but also product-market considerations. A sample of CVC investments in the medical device industry (1978-2007) affords a unique opportunity to test the expansive framework: in this industry one can systematically observe learning (i.e., patenting) and product-market (i.e., FDA's Pre-Market Approvals) outcomes. The evidence suggests that coinvestment is mostly consistent with product-market considerations: co-investors introduce more innovative products compared to firms that forego investment, yet the benefits are eroded for a firm that joins the investment syndicate later. We conclude that as firms pursue greater collaborations in their open innovation strategies (and CVC investment in particular), future research should consider learning along with other theoretical considerations, and utilize settings that allow empirical discrimination among them..

The seminar takes places in Kilen, room 2.53 and is open to all.