W4: Miles & Covin (2002): Exploring the Practice of Corporate Venturing: Some Common Forms and Their Organisational Implications Flashcards
Corporate entrepreneurship (CE)
Has potential to rejuvenate and revitalise corporations. Top executives often see it as an important tool for business development, revenue growth, and as a promising path to enhance financial returns
Corporate venturing
One manifestation of CE. It can be externally or internally focused. It can occur in the form of direct corporate venturing or indirect corporate venturing
External venturing
Refers to corporate venturing activities that result in the creation of semi-autonomous or autonomous organisational entities that reside outside the existing organisational domain
Internal venturing
Activities that result in the creation of organisational entities that reside within an existing organisational domain
Indirect corporate venturing
The larger firm invests in a venture capital fund that serves as a financial intermediary between the corporation and the entrepreneurial ventures in which the investments are made
Direct corporate venturing
Capital is invested by the larger firm in the smaller firm. It is typically combined with management assistance and technology sharing
Investment intermediation
The presence of it is largely a function of the corporation’s (1) level of commitment to entrepreneurial initiatives, (2) preferred degree of control over the initiatives, and (3) ability to accept and manage entrepreneurial risks, and (4) desired level of market diversification. It adds value to the venturing activity of the corporation
Presence of investment intermediation
Either there is direct investment in the venture through the corporation’s operating or strategic budget, or there is indirect investment in the venture using financial intermediaries
Direct-internal venturing
The simplest form of corporate venturing, where employees with a business idea are permitted or encouraged to develop and then commerically exploit that idea within the corporate structure. It implies that the idea was generated within the corporation and funded, developed, and commercialised using internal resources
Direct-external venturing
Takes place when, without using a dedicated new venture fund, a corporation acquires or purchases equity in an external entrepreneurial firm, often with the objective of facilitating the transfer of technology, resources, capabilities between the business entities
Indirect-internal venturing
Occurs when the corporation invests in a venture capital fund designed to encourage corporate employees to develop internal ventures. The venture capital fund typically originates and operates within the corporate and is managed by corporate employees. This independent investment intermediary could be a ‘captive fund’ owned by the coporation, funded with corporate resources, and managed by a corporate-wide venture board
Indirect-external corporate venturing
When the corproation invests in a venture capital fund that targets external ventures in specific industries or technology sectors. Two common variants; (1) Venture capital fund originates from outside the corporation and is managed by non-corporate employees. The corporation operates as one of several investors in a venture capital fund, and the interest in the external ventures targeted by the fund may be strategic or financial, and (2) The venture capital fund originates within the corporation and is managed by corporate employees
Direct approach
Favoured by corporate managers with greater venture-control needs due to the hands-on benefit
Indirect approach
Distances the locus of venture activity from corporate management’s oversight and may be more acceptable to low-control needs
Internal venturing focus
Posited as most appropriate for corporations with the organisational development and cultural change objective. This is based on the belief that entrepreneurial cultures and capabilities they enable cannot be acquired from external sources; they must emerge from within
Strategic benefits/real options development objective
The desire to more fully appropriate value from current organisational competencies, or to strategically reinvent or stretch the corporation. Internal or external focus may be appropriate here. The authors believe that corporations most effective at this use a combination of internal and external nodes
Internal and external venturing as effective complements
Internal venturing may enable corporations that also practice external venturing to develop “absorptive capacity.” Vice versa, to pursue business opportunities in areas deemed strategically important to the corproation, but which are beyond the company’s capacity to exploit successfully or quickly
Quick financial returns objective
Venturing in new business arenas is used as a means to circumvent the profitability caps inherent to one’s core product-market segments or industries. The new business activity usually takes place in a related but more lucrative arena than that in which the coporation operates. External venturing focus may be best to fulfill this objective. Internal corporate venturing initiatives typically have multi-year payback periods, and highly uncertain returns
Joint venturing options
Explored by many companies to spread business risks, hasten the start-up process, or overcome internal venturing capability inadequacies
