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How firms continuously develop and renew capabilities is at the core of strategic management. Given the current pace of disruption, this question is even more compelling. Based on a longitudinal multiple cases study, this paper inductively develops a 4-step process model of corporate entrepreneurial capability building through industry-led accelerators: i) attracting external streams, ii) strategic fit sensing, iii) shaping streams, and iv) internalizing and re-designing structures. We advance a novel mechanism-based explanation of how R&D units and corporate innovation units of established firms develop entrepreneurial capabilities. We contribute to the corporate entrepreneurship/venturing, and organizational design streams by bringing together previously disconnected streams to resolve a puzzle in a novel setting to theorize about capability building and accelerated entrepreneurial innovation redesign in the modern corporation.
Spanning Two Worlds: Corporate Accelerators and Corporate Venture Capital in Innovation Portfolios
Sheryl Winston Smith,
BI Norwegian Business School
In the face of technological and business model disruption, often originating in innovative startups, how do companies respond with entrepreneurial ideas? Specifically, how do established companies use entrepreneurial approaches for access to startup innovation? Using a sample of companies using both corporate accelerators and corporate venture capital investing to partner with startups, this study provides descriptive evidence of the distinct role of both types of external knowledge search. The paper points to greater experimentation in CVC portfolios relative to corporate accelerator portfolios in both focus and industry distribution. At the same time, corporate accelerators encourage greater geographic distribution in their portfolio companies. A novel algorithmic approach using natural language processing and machine learning is used to characterize portfolio company distributions.
The Role of Crowdfunding in an Equity Pecking Order
Crowdfunding is emerging as a novel way for entrepreneurs to secure scarce early-stage financing. With venture capital still being the most important source of funding for innovative ventures in later stages, this raises the ques-tion of potential interactions between crowdfunding and traditional forms of start-up financing. We investigate whether venture investors perceive a seed-financing hierarchy by entrepreneurs, and whether this equity pecking order is affected by venture quality and could therefore serve as an uncertainty-reducing signal. Drawing on a choice experimental research design we find causal evidence that VCs believe that “lemons” have a higher relative likelihood than “peaches” of turning to crowd-based financing as a first means of external equity funding, suggest-ing a perceived negative selection bias. Theoretical and managerial implications are discussed.
Crowdfunding is emerging as a viable way for entrepreneurs to secure early-stage financing. With venture capital still being the most important funding source for young innovative firms in later stages, it appears important to study the interactions between new and traditional forms of venture financing. Our study examines whether venture investors relate a young firm’s initial choice of a particular funding channel to its inherent quality. We run a choice-experiment with practicing VCs and business angels and find that they believe that low-quality startups tend to start crowdfunding campaigns, whereas high-quality startups directly approach professional venture investors. Our findings are particularly relevant for founders, who need to be aware that their initial choice of a financing source might reduce their chances of getting follow-up funding.
Good To Go First? Position Order Effects in Expert Evaluation of Early-stage Ventures
Stanford University Yanbo Wang,
National University of Singapore Jason Greenberg,
New York University
There is considerable anxiety and conflicting advice concerning the benefits of presenting/being evaluated first. In this paper, we investigate how randomly assigned experts vary in their evaluations of pitches, based on position order, in the premiere innovation fund competition in Beijing, China. As written material was the sole basis of evaluation used by the experts—in contrast with the persuasiveness of oral or live sports/musical presentations that may vary considerably across performances and which may be impacted by (even random) performance order—we have a compelling context to assess evaluation order effects. We find that an applicant that is evaluated first needs net profits in the top fifth percentile to merely equal the evaluation of an applicant in the bottom first percentile that is not evaluated first.