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| Author: | Benson, D. Ziedonis, R.H. |
| Title: | Corporate venture capital and the returns to acquiring portfolio companies |
| Journal: | Journal of Financial Economics
2010 : DEC, VOL. 98:3 p. 478-499 |
| Index terms: | finance investors portfolio investment shareholders |
| Freeterms: | CVC start-ups |
| Language: | eng |
| Abstract: | A prominent motive for corporate venture capital (CVC) is the identification of entrepreneurial-firm acquisition opportunities. Consistent with this view, it is found that one of every five start-ups purchased by 61 top corporate investors in 1987-2003 is a venture portfolio company of its acquirer. Surprisingly, the analysis unveils that takeovers of portfolio companies destroy significant value for shareholders of acquisitive CVC investors, even though these same investors are good acquirers of other entrepreneurial firms. This paper examines several explanations for these puzzling findings, which seem rooted in managerial overconfidence or agency problems at the program level. |
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