Effects of Corporate Venture Capital activity, Vacillation frequency and Vacillation Intensity on Firm Performance.

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The increasing importance of innovation goes along with an increase in costs of internal innovation. Due to this, organizations seek for alternative ways of innovating. This said, organizations increasingly conduct venture capital investments as a complement or alternative way for their own research and development, with the goal of bolstering their performance (Chesbrough, 2002). Organizations explore the environment for ventures with valuable knowledge, products or innovating capabilities and invest in these by means of venture capital. However, in order to benefit from this exploration, organizations need to exploit the gained knowledge, products or innovations. Thus, there is a need for both exploration as exploitation in order to benefit from venture capital activity. This is where the vacillation theory becomes relevant. Vacillation is the dynamic process of ‘oscillating’ between structures supporting either exploration or exploitation to achieve the state of ambidexterity (Brown and Eisenhardt, 1997). Despite the attention paid to both the concepts, there has been no research conducted focusing on the relationship between the organization’s structure/focus and corporate entrepreneurship. This study aims to narrow the scientific gap by examining the interplay between corporate venture capital activity and vacillation between structures supporting either exploration or exploitation. The study was conducted by using 4 year panel data from 150 large North American corporations, excluding financial institutions. The results indicate that both frequency and intensity of vacillation have an inverted U-curve relationship with firm performance. Furthermore, vacillation intensity positively moderates the relationship between corporate venture capital activity and firm performance. In conclusion, the results of this study provides new insights into the interplay between corporate venture capital activity and vacillation, with the goal of supporting senior managers in their understanding and the utilization of both concepts.
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