Business builders, contractors, and entrepreneurs — An exploratory study of IP venturing funds

ABSTRACT

Despite the importance of investments in innovative ventures, riskiness often deters investors. We investigate the phenomenon of intellectual property (IP) venturing funds, which commercialize technology via start-up creation. Based on six cases analyzed at the deal and fund level, we establish a dichotomy of investment styles. In an opportunity-driven investment style, funds act as entrepreneurs and are compensated for opportunity recognition. In a technology-driven investment style, funds act as contractors, applying novel mechanisms to reduce agency costs and keep due diligence costs low. Thus, we contribute to knowledge of new investment models in entrepreneurial finance and how they manage agency risks.

KEYWORDS:

• Qualitative
• start-up
• venture capital
• patents
• intellectual property
• technology commercialization

Acknowledgments

The authors are grateful for challenging meetings and several friendly reviews by Reiner Braun. Furthermore, we thank the anonymous reviewers from the 2018 Academy of Management Conference, the 2018 Leuphana Conference on Entrepreneurship, and the 2017 G-Forum. Great thanks for friendly reviews goes to Sibin Wu and Silke Tegtmeier for their thoughts and comments that greatly advanced the manuscript.