Corporate Venture Capital: Bridging the Equity Gap in the Small Business Sector

Chapter 1 discussed the dramatic growth in the number of new forms of collaborative, inter-firm relationship that have been seen since the beginning of the 1980s. While inter-firm agreements are nothing new, this current wave involves a much wider and more flexible range of relationships than has previously existed (Chesnais, 1988), with collaboration occurring for a wide variety of reasons and manifesting itself in a number of forms (Dodgson, 1993). Various theories have been posited in an attempt to account for this trend towards collaboration, and it has been argued that a major cause has been the intensification of external pressures on companies within the contemporary marketplace (Collins and Doorley, 1991). To survive in this environment firms have needed to seek greater efficiency, greater flexibility and a reduction in uncertainty (Mytelka, 1991; Ahern, 1993a; Block and MacMillan, 1993), and collaboration has been viewed by many companies as a way of achieving these objectives and hence improving their ability to compete (Skjerstad, 1994). Alliances formed between large and small companies have the potential to be particularly beneficial to both partners due to the complementary characteristics of such firms, not least in areas of innovation (Hull and Slowinski, 1990; Rothwell, 1993).

The review of the collaboration literature in Chapter 1 highlighted the lack of research into individual alliance forms. It was argued that there is a need for such research in order to improve our understanding of the motivations and objectives of companies for establishing particular types of alliance. Corporate venture capital (CVC) investment has been identified as a form of inter-firm collaboration between large and small companies which has been largely neglected in the literature. The available evidence suggests that it is an underdeveloped activity in the UK. This chapter examines the reasons why some companies make CVC investments, and the reasons why other companies do not. It presents the results of a series of interviews conducted with senior corporate executives at a number of UK-based corporations. After

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