Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 428: Embracing the sharks: The impact of information exposure on the likelihood and quality of CVC investments

Ali Mohammadi () and Pooyan Khashabi ()
Additional contact information
Ali Mohammadi: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: SE-100 44 Stockholm, Sweden
Pooyan Khashabi: Ludwig-Maximilians-Universität (LMU), Munich School of Management, Institute for Strategy, Technology and Organization, Postal: Kaulbachstr 45 , 80539 Munich , Germany

Abstract: For high-tech startups, gaining access to resources and funding is often considered crucial. This need has created technology markets to attract partners and resource providers. Corporate venturing is a form of markets for technology (MfT) that provides nurturing, specialized advice and resources to new technology by investing in startups. However the typical issues involved with MfT – namely misappropriation risks– have made startups reluctant about sharing their key technological information with corporate venture capitalists (CVC), potentially retarding efficient market matching and consequently technology development. Lifting informational constraints may facilitate the market and enable us to measure the pure impact of CVC investment. Assessing the potential impact of information constraints has been challenging due to severe endogeneity concerns. This study investigates the causal impact of technological information exposure on the likelihood, quality and timing of CVC-startup match formation. We exploit the American Inventor’s Protection Act (AIPA) as an exogenous shock to technological information publicity, which enables us to measure an unbiased impact of information exposure. The results confirm that strategic information withhold by startups has lowered the incident of CVC investments, while informational exposure increases the likelihood, quality and hazard rate of CVC-startup match.

Keywords: American Inventor’s Protection Act; Corporate Venture Capital; Information revealing; high-tech startups; Misappropriation

JEL-codes: G14; L26; M13; O32

34 pages, March 1, 2016

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