Are entrepreneurial venture's innovation rates sensitive to investor complementary assets? Comparing biotech ventures backed by corporate and independent VCs

Alvarez-Garrido, E and Dushnitsky, G (2016) Are entrepreneurial venture's innovation rates sensitive to investor complementary assets? Comparing biotech ventures backed by corporate and independent VCs. Strategic Management Journal, 37 (5). pp. 819-834. ISSN 0143-2095

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.