The limited interest of carmakers in corporate venture capital: insights from a mature industry

Abstract

A whole corpus of literature has evolved to discuss the motivation of industrial companies in creating corporate venture capital (CVC) funds. However, most studies have been limited to technology sectors that are particularly active in this domain. The present paper seeks to analyse a mature economic sector – automobiles – which should have good reason to take an interest in CVC. A panel comprising 13 of the world’s leading carmakers reveals that (1) few operate any CVC funds; (2) the ones that do tend not to be very active; and (3) investments basically correspond to strategic motivations of the kind that literature already envisions. These findings suggest that CVC studies in particular sectors should take a closer look at institutional isomorphism and consider how inter-firm relationships are organised.

Keywords:

• Corporate venture capital
• investments objectives
• automotive, institutional isomorphism
• industry organisation
• innovation

Acknowledgements

The authors would like to thank the Editor, Colin Mason, and the anonymous reviewers for valuable comments on previous versions of the paper. The usual disclaimers apply.

Notes

1. Only external motivations are considered here. Indeed, a CVC can also be used as an internal management tool (Winters and Murfin 1988).

2. Note that some information was difficult to obtain because certain investee firms disappeared during the course of the period in question.

3. As an illustration, one of Venturepark Incubator AG’s first investments in France involved Plusport, a sporting goods marketplace. This fund shut down in June 2001, requiring a redistribution – notably to DaimlerChrysler Venture – of 60% of the initial investment (amounting to €20 million).

4. BMW did commit strongly in recent years to the design of more sustainable vehicles but it decided to internalise the requested key competencies. This raises questions about the limits of CVC programmes to finance the most strategic innovations.

5. Examples include recent French automotive industry leaders who graduated from top engineering schools (C. Ghosn (Nissan then Renault-Nissan); P. Varin (PSA, 2009–2014) C. Streiff (PSA, 2007–2009). Previously, L. Schweitzer (Renault, 1992–2005) was a graduate of the ENA public administration management postgraduate program. Toyoda (Toyota’s CEO since 2009) has an MBA; A. Mullaly (Ford, 2006–2014) a MSc in Management; Mong-Koo (Huyndai) a BSc; B. Pischetsrieder (VW, 2002–2006) a “Diplom-ingenieur”; N. Reithofer (BMW, since 2006) is Dr.Ing; H. Panke (BMW, 2002–2006, Doctorate in nuclear physics).

6. Note that the normative dimension appears essentially in a national framework. But as we have seen, the carmaker’s nationality does not fully explain carmakers’ interest/disinterest in CVCs.

7. Gaba and Meyer (2008) have demonstrated the singularity with which the IT sector has adapted and disseminated VC and CVC practices.

8. Maybe because especially as they have lost some power vis-à-vis their mega-suppliers (Frigant 2016).

9. By example, in 2016 Groupe PSA has announced a direct investment in TravelerCar: a start-up specialised in mobility services.