Strategic Media Venturing: Corporate Venture Capital Approaches of TIME Incumbents

ABSTRACT

Media firms act in rapidly changing and converging environments characterized by new entrants and increasing competition from related industries. As a reaction to this, the incumbents of the telecommunication, information technology, consumer electronics, media, and entertainment industry have increased their corporate venture capital activities. Corporate venture capital activities are a popular approach for gaining access to new innovative ideas and opportunities. Despite this practical relevance, the theoretical underpinning of corporate venture capital and the corporate venturing activities of media firms are poorly understood. Therefore, the purpose of this article is to close this gap by defining corporate venture capital as a bundle of dynamic capabilities (“organizational drivetrain”) and revealing the differences and commonalities of telecommunication, information technology, consumer electronics, media, and entertainment incumbents’ corporate venture capital approaches as response to the ongoing convergence of a technology-driven business environment. To do so, we conducted an exploratory study of 3,145 transactions by 68 telecommunication, information technology, consumer electronics, media, and entertainment incumbents in 2,163 start-up companies between 2002 and 2015, detecting, describing, and comparing their corporate venture capital approaches. The findings reveal a taxonomy of three different types of corporate investors, namely “aggressive,” “attentive,” and “dispersive.” While the aggressive approach covers the most active investors of the sample, who invest primarily in early-stage ventures, attentive investors show a more conservative investment behavior, focusing on their core business within their local proximity. In contrast, dispersive investors disproportionately fund established businesses in a broad array of industries. Hence, the study highlights a sector-dependent usage with incumbents of each telecommunication, information technology, consumer electronics, media, and entertainment sector preferring a different investment approach indicating the influence of previous path, positions, and processes.

Acknowledgments

The authors would like to thank Andreas Will (Technische Universität Ilmenau) for his valuable suggestions and contributions that greatly improved the quality of the article. Further, we would like to thank the editors and review team for their insightful comments. An earlier version of the current article was presented at the Technology, Innovation, and Entrepreneurship Conference 2016 of the Verband der Hochschullehrer für Betriebswirtschaft e.V. in Copenhagen (Technical University of Denmark).

Notes

1. Telecommunication, Information Technology, Consumer Electronics, Media, and Entertainment.

2. Besides financial and strategic objectives, CVC has a third objective: social responsibility. The reasoning is that the increasing availability of CVC leads to greater employment. This macroeconomic point-of-view is not part of this study.

3. Previously known as VentureXpert.

4. According to the European Venture Capital Association’s industry classification and the Nomenclature statistique des activités économiques dans la Communauté européenne (NACE), the TIME industry in the present article is defined as: telecommunication (46.52, 47.42, 95.12, 26.3*, 61.**), Internet technology (63.11, 63.12, 62.09), consumer electronics (26.2*, 26.4*, 47.43, 95.21, 26.8*, 46.51, 47.41), and media and entertainment (18.**, 58.**, 59.**, 60.**, 63.9*, 73.1*).

5. The Orbis database is one of the worldwide leading databases for general company information. In total, the database contains financial information relating to more than 170 million companies worldwide aligned with industry reports, current ownership structure, country profiles, press reports, and rumors about M&A activities, as well as information about board members, directors, and managers.

6. In contrast to the U.S. definition, Europeans often include specific buyout types such as MBOs or MBIs when defining CVC.

7. Even so, dedicated funds financed by parent companies and managed by venture capitalists might be strategically relevant; we believe that the strategic value of indirect investments is insignificant compared with that of direct investments. Furthermore, only 10% of all CVC deals are indirect investments according to MacMillan et al. (2008).

8. At least six transactions within the timeframe.