How Technological Overlap between Spinouts and Parent Firms Affects Corporate Venture Capital Investments in Spinouts: The Role of Competitive Tension

Academy of Management Journal, Volume 64, No. 2, April 2021

Joonmahn Lee, Korea University Business School

Joonhyung Bae, Sungkyunkwan University

We investigate how technological overlap between spinouts and parent firms influences corporate investors’ decisions regarding investments in spinouts. We suggest that a high level of technological overlap between a spinout and its parent firm deters potential corporate investors from making an investment in the spinout because if competitive tension arising show that the negative effects are amplified when parent firms have a strong litigiousness in claiming their intellectual property rights. However, we find that the negative effects are weakened when corporate investors can expect benefits from gaining indirect access to parent firms’ technological knowledge. Using a sample of corporate venture capital investment in the U.S. medical device industry during the period if 1995-2015, we find evidence that supports our hypotheses.

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