A Temporal Perspective on Corporate Venture Capital Investments' Potential to Drive Innovation

ABSTRACT Corporate venture capital (CVC) investments are a major means by which corporations access information from startups to facilitate their own innovation. While the literature implies a static perspective, we offer a dynamic account that accommodates CVC investments' typical occurrence in staged rounds. Building on and adding to resource dependency theory, this study offers a research model that differentiates temporally between first and follow‐on CVC investments and their effects on the investing firm's product and business model innovations. Adding further temporal nuances, we also investigate whether the degree of relatedness between the investing firm's and the venture's industries affects these relationships. Using data on 708 firms from 2005 to 2019, we show that first CVC investments in new ventures particularly benefit investors' product innovations, while follow‐on CVC investments especially benefit their business model innovations. We also demonstrate that related investments tend to amplify the effects of first CVC investments, while unrelated investments tend to enhance the effects of follow‐on CVC investments. Thus, the study introduces a temporal perspective and highlights the complex interplay among the investment round, the type of innovation, and the relatedness of investments in determining CVC investments' temporal effects on innovation.