The search of complementarity in explorative strategies: The relationship between corporate venture capital investments and corporate diversification

This paper uses data on 221 Corporate Venture Capital (CVC) funds created by 186 US public firms during the period 1996–2006 in order to examine the presence of complementarity/substitution between corporate diversification and CVC fund diversification as different forms of exploration. Our results suggest that corporations undertake CVC investments to substitute corporate diversification if the focus is to explore new markets, and complement corporate diversification in the search of new technological domains. We also find that these relationships are sensitive to industry- specific factors: in high-tech sectors the substitution effect for the market side vanishes and the technological complementary effect is amplified.