Corporate Venturing Investments and Competence-Based Growth Strategy: Theoretical Integration and Empirical Evidence
Date Issued
2004
Date
2004
Author(s)
Liu, Heng-Yih
DOI
en-US
Abstract
Competence renewal is important for firm growth when the environment constantly changes in an unanticipated way. However, it may be difficult for current existing management to build new competencies because of learning myopia, and external search for new competencies provides an alternative way to achieve this end. This dissertation proposes that corporate venturing investment (CVI, hereafter) can serve as a strategic means to realize synergy as well as gain learning benefits. CVI is defined as a firm’s direct equity investment on an external entrepreneurial firm. From competence-based and organizational learning views, we submit a competence-based growth initiative, including competence replicating, competence leveraging, competence upgrading and competence building activities, by which we conceptualize two types of CVI; namely synergistic type vs. learning type. A synergistic type of CVI involves competence replicating and leveraging, and a learning type contains competence upgrading and building activities. To distinguish these two types of CVI, we develop a new method for measuring competence similarity between manufacturing firms.
After consolidating a list of products produced in the computer and electronics industry, we construct and measure the underlying competence similarity by looking at three competence dimensions; namely product design competence, conversion process competence, and commercialization competence. To this end, we adopted expert rating to get a table of competence similarity among these products. Assuming each dimension of competence is equally important, we sum up the scores from three competence dimensions to get the total score for competence similarity. At least one of the three dimension is more than 4 points will be regarded as synergistic type of CVI, and learning type of CVI otherwise. In so doing, we can have a complete picture about the extent to which a specific CVI is characterized by related competence, by which we are able to discern underlying strategic purpose.
We submit that both internal and external drivers will exert influence on the choice of specific type of CVI. Taking a sample of manufacturing firms from the computer and electronics industry in Taiwan, this dissertation argues and finds that firms with better prior relative performance or larger size are more likely to pursue learning type of CVI. Because these firms that performed better in the past tend to retain their capabilities in the subsequent period, it becomes the cause of core rigidity and organizational inertia. Moreover, existing managers are constrained by learning myopia. From the competence logic, to balance between competence leveraging and building activities, these firms are more likely to pursue learning
type of CVI. In contrast, while economic condition is getting better or growth opportunity is present at the product level, it will prompt a firm to leverage its current competence in an attempt to obtain economic gains in a very short period of time. In other words, synergistic type of CVI will be pursued.
In addition, we further discuss the adequate governance structure for CVI, and argue that the focal firm is likely to maintain a higher equity position in a CVI characterized by higher competence similarity. However, for learning type of CVI, we specifically define vertical CVI that gets involved in business along with the value chain. By integrating competence-based, transaction cost economics, and real option theory, we further found that the focal firm is more likely to pursue lower equity positions in vertical CVI.
This dissertation contributes by developing and measuring the concept of competence similarity, by which we are able to offer a typology of CVI. We unveil the CVI phenomenon to inform the practitioners by examining the conditions under which they can decide how to manage between synergistic and learning type of CVI, and integrate three theoretical perspectives to submit appropriate CVI governance structure. Of more importance, learning type of CVI is what we believe beneficial to firm’s longevity.
Subjects
能耐相似性
成長策略
能耐基礎觀點
統治結構
企業創業投資
Corporate Venturing Investment
Governance Structure
Growth Strategy
Competence-based View
Competence Similarity
Type
thesis