Is There an eBay for Ideas? Insights From Online Knowledge Marketplaces

The market for knowledge has grown dramatically over the past decades. Extant work underscores the factors shaping market efficacy: (a) the cost of searching for innovative knowledge; (b) asymmetric-information between inventors and investors; and (c) the inherent difficulty in maintaining ownership over knowledge. Recently, market transactions have been taking place online, matching disperse owners (entrepreneurs or inventors), and seekers (investors or licensees), of knowledge. This phenomenon constitutes a sharp departure from past practices where transactions tend to materialize around one\u27s social circle (e.g., venture capitalists\u27 social ties). We investigate the drivers of market efficacy in a setting where social ties are not available ex-ante, and identify alternative market mechanisms that emerge in such settings. Using novel hand-collected data for 30 online knowledge marketplaces, we find overwhelming evidence of adverse-selection-mitigating mechanisms (e.g., screening through upfront fees and disclosure requirements). We discuss theoretical explanations that are consistent with the observed mechanisms

When does corporate venture capital investment create firm value

Abstract Over the past decade, billions of dollars have been invested by established companies in entrepreneurial ventures-what is often referred to as corporate venture capital. Yet, there is little systematic evidence that corporate venture capital investment creates value to investing firms. Scholars have suggested that established firms face underlying challenges when investing corporate venture capital. Namely, structural deficiencies inherent in corporate venture capital may inhibit financial gains. However, firm value may still be created as a result of other benefits from investing-primarily providing a window onto novel technology. In this paper, we propose that corporate venture capital investment will create greater firm value when firms explicitly pursue corporate venture capital to harness novel technology. Using a panel of CVC investments, we present evidence consistent with our proposition. The findings are robust to various specifications and remain unchanged even after controlling for unobserved heterogeneity in investing firms. Our results have important implications for corporate venture capital in particular, and technology strategy in general.

Entrepreneurial Finance Meets Organizational Reality: Comparing Investment Practices And Performance Of Corporate And Independent Venture Capitalists

This paper investigates the effect of compensation of corporate personnel on their investment in new technologies. We focus on a specific corporate activity, namely corporate venture capital (CVC), describing minority equity investment by established-firms in entrepreneurial ventures. The setting offers an opportunity to compare corporate investors to investment experts, the independent venture capitalists (IVCs). On average, we observe a performance gap between corporate investors and their independent counterparts. Interestingly, the performance gap is sensitive to CVCs' compensation scheme: it is the largest when CVC personnel are awarded performance pay. Not only do we study the association between incentives and performance but we also document a direct relationship between incentives and the actions managers undertake. For example, we observe disparity between the number of participants in venture capital syndicates that involve a corporate investor, and those that consist solely of IVCs. The disparity shrinks substantially, however, for a subset of CVCs that compensate their personnel using performance pay. We find a parallel pattern when analyzing the relationship between compensation and another investment practice, staging of investment. To conclude, the paper investigates the three elements of the principal-agent framework, thus providing direct evidence that compensation schemes (incentives) shape investment practices (managerial action), and ultimately investors¡¦ outcome (performance).

Mergers, Antitrust, and the Interplay of Entrepreneurial Activity and the Investments That Fund It

This Article addresses the potentially negative implications of proposed antitrust legislation on the entrepreneurial ecosystem in general, with a particular focus on the venture capitalists (VCs) that fund it. First, it offers a review of how antitrust merger law currently works and how proposed legislative changes to antitrust may threaten the innovative Venture Capital (VC)-backed ecosystem that has made the United States the center of global innovation across many different industries. Accompanying this review are some empirical observations. Second, recognizing that the understanding of innovative entrepreneurial activity calls for a deep appreciation of those who back it, the Article also provides an overview of the entrepreneurial ecosystem and VCs’ motivations within this niche environment. In so doing, the Article identifies the drivers of entrepreneurial innovation and explains why changes to merger law may threaten these models of facilitating innovative, growth-orientated entrepreneurs. Finally, the Article concludes that changes to merger law may negatively affect the entire entrepreneurial ecosystem and hinder innovation in the United States