Firm Network Position and Corporate Venture Capital Investment

Abstract

This study investigates why some firms have been more likely to make corporate venture capital investments than others. We anchor this study within a social networks perspective and prior network research that shows that information about business practices diffuses unevenly through interlocking boards, thereby influencing the corporate adoption of novel business practices. Using annual data on interlocking boards and corporate venture capital investments for S&P500 companies for the years 1996–2006, we show that a firm's corporate venture capital investment behavior can be predicted by its cumulative access to information about corporate venture capital practices gained through interlocking boards.

Notes

8. A note on network data and multicollinearity: as is clear in Table 2, there is significant multicollinearity among certain variables, particularly between counts of direct ties and indirect ties. This is somewhat expected because, almost by definition, firms with more first‐degree ties to other firms—both to firms making CVC investments and generally—are also more likely to have more second‐ and third‐degree ties. This is an idiosyncrasy of network data. To address the potential risk that this multicollinearity might mask an effect of any study variable, but primarily the tight relationships between direct and indirect contacts, we ran a separate stepwise regression (0.05 to enter, .1 to remove) to verify that only variables that appear in the results enter the model. The stepwise regressions support the results presented in this paper.

Additional information

Notes on contributors

Erik Noyes

Erik Noyes is associate professor in the Department of Entrepreneurship, Babson College.

Candy Brush

Candy Brush is professor in the Entrepreneurship Division—Arthur M. Blank Center, Babson College.

Ken Hatten

Ken Hatten is professor in the Department of Strategy and Policy, Boston University.

Laurel Smith‐doerr

Laurel Smith‐Doerr is associate professor in the Department of Sociology, Boston University.