Are Entrepreneurial Ventures’ Innovation Rates Sensitive to Investor Complementary Assets?

Comparing Biotech Ventures Backed by Corporate and Independent VCs

Elisa Alvarez-Garrido, Darla Moore School of Business, and Gary Dushnitsky, London Business School

Strategic Management Journal, DOI: 10.1002/smj.2359

Abstract: Entrepreneurial ventures are a key source of innovation. Nowadays, ventures are backed by a wide array of investors whose complementary asset profiles differ significantly. We therefore assert that entrepreneurial ventures can no longer be studied as a homogeneous group. Rather, we harness the inherent dichotomy in the profiles of independent VCs and corporate investors to study ventures’ innovation outcomes. Our sample consists of 545 U.S. biotechnology ventures founded between 1990 and 2003 and backed by independent venture capitalists (VCs) or corporate VCs (CVC). We find CVCs’ investees exhibit higher rates of innovation output, compared to independent VC-backed peers. Moreover, the performance of CVC-backed ventures is sensitive to their ability to leverage corporate assets, underscoring the role of CVC accessibility and FDA approval requirements as the mechanisms associated with CVC contribution.

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