Doctoral Dissertation Research in Economics: Corporate Venture Capital and Its Impact on Young Firm Growth

This award is funded in whole or in part under the American Rescue Plan Act of 2021 (Public Law 117-2).

High-growth young firms contribute considerably to U.S. job creation and productivity growth. While institutional venture capital (IVC) is a key factor in the financing of high-growth young firms, a quarter of U.S. venture investments are made by industrial firms in the form of corporate venture capital (CVC). Unlike IVC as a form of financial intermediation, CVC entails a match between industrial firms that are likely motivated by product market or technological synergies beyond a pure financing relationship.

This project will investigate whether and how CVC contributes to young firm growth relative to IVC. Using detailed data, the project will compare young firm growth across industries with varying degrees of CVC presence. The project will then explore the mechanisms through which CVC influences young firm outcomes.

Results from the project will have potential policy implications on entrepreneurship and economic growth.

The project will assemble a micro-level dataset that links venture capital funded firms to their funders as well as to their patenting activity and exit outcome (via an initial public offering or an acquisition). The empirical model will explore the outcomes of funded firms in an industry in relation to a measure of lagged CVC presence in that industry, conditioning on a rich set of fixed effects and covariates including IVC investments.

The empirical model will feature a shift-share style research design that predicts CVC (and IVC) investments using the interaction of the initial market shares of different funders and several instruments for funder supply shifts. An endogenous growth model of firm innovation incorporating CVC investments hypothesizes that CVC enhances a young firm’s innovation effort, hence growth outcomes, when the two parties share strong demand-side or technological linkages.

The hypothesis will be tested empirically using the industry input-output matrix and the patent citation matrix.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.