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Non-strategic spin-offs: the use of corporate venturing in developing and supporting nascent ventures
Linköping University, Department of Management and Engineering. Linköping University, The Institute of Technology.
2007 (English)In: New Technology Based Firms in the New Millennium, ISSN 1876-0228, Vol. 5, 157-173 p.Article in journal (Refereed) Published
Abstract [en]

This paper analyzes the emergence of sponsored spin-offs where the parent firm retains partial ownership. A sponsored spin-off is a spin-off, which has received active support from the parent organization. The paper analyzes this emergence in a corporate venturing setting and targets the competitive advantages and disadvantages of corporate venturing (over e.g. traditional venture capitalists) in the early business creation process. The research object is a large multi-technology firm in Sweden, which has incorporated the use of sponsored spinoffs in thiir corporate venturing activities. Four interviews were carried out with respondents from the corporate venturing unit and two spin-off firms.

In this paper we develop a model based on increasing costs to decrease information asymmetries between the corporate venturing unit and external actors when more resources are devoted to developing and supporting the nascent venture. The model illustrates the competitive advantage of corporate venturing units in early stage development of internal non-strategic ventures and the emergence of sponsored spin-offs from such non-strategic ventures, where the parent firm retains partial ownership. Corporate venturing units have an informational advantage over external actors such as venture capitalists concerning e.g. technological due diligence of internal ventures. This advantage is however limited to developing and supporting early stage (nascent) ventures.

The challenge for real life firms is to estimate when they no longer can profit from the information asymmetry, i.e. when the cost for further venture development has reached some critical level. The analysis presented here illustrates how a low-cost/low risk corporate venturing strategy can force the corporate venturing unit to 'guesstimate' this point. In relation to this, we suggest an explanation of the creation of sponsored spin-offs based on an interpretation of sponsored spin-offs as an emergent phenomenon, caused by relatively simple environmental restrictions (low cost/low risk), rather than a carefully planned- for strategy.

Place, publisher, year, edition, pages
Elsevier Science ltd , 2007. Vol. 5, 157-173 p.
National Category
Engineering and Technology
URN: urn:nbn:se:liu:diva-59498ISI: 000281438300010OAI: diva2:351940
Available from: 2010-09-17 Created: 2010-09-17 Last updated: 2013-10-23
In thesis
1. Early-stage finance: exploring the financial context of small and young knowledge-intensive firms
Open this publication in new window or tab >>Early-stage finance: exploring the financial context of small and young knowledge-intensive firms
2005 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis essentially explores early-stage finaneing of small and young knowledge-intensive finns. The three studies underlying the thesis deal with the entrepreneurs' attitudes to financing and the creation of spin-affs in a corporate venture capital setting. The major questions posed in the thesis embrace:

  • What variables underlying the business creation process govern the elementary logic behind the entrepreneur's perceived importance of different actors as financiers?
  • Do cognition elements of risk and contral influence the entrepreneur's attitudes towards financing?
  • What is the strategic and financial logic behind a large public corporation initiative to continuously create internal and non-strategic ventures?

In the pursuit of answering the above research questions two survey studies and one case study were accomplished. Interesting findings cornprise the significance of the business context, the novelty of the venture idea, existing financing, the entrepreneur's extent of self-efficacy and expectations on externai financiers in determining the entrepreneur's attitudes towards financing.

Another insight uncovered in this thesis is the delicate balance between generating short-term financial gains through the creation of non-strategic internal ventures, and at the same time sustaining overall business strategy. In certain conditions, it might even be possible that such venturing activities might function as a strategic trash can reinforcing the business strategy pursued, and at the same time generate short-term profits.

Place, publisher, year, edition, pages
Linköping: Linköping University Electronic Press, 2005. 67 p.
Linköping Studies in Science and Technology. Thesis, ISSN 0280-7971 ; 1222Dissertations from the International Graduate School of Management and Industrial Engineering, ISSN 1402-0793 ; 99
National Category
Social Sciences
urn:nbn:se:liu:diva-65869 (URN)LiU-TEK-LIC-2005:74 (Local ID)91-85457-95-7 (ISBN)LiU-TEK-LIC-2005:74 (Archive number)LiU-TEK-LIC-2005:74 (OAI)
2005-02-25, Terrafirman Hus Terra, Campus Valla, Linköpings universitet, Linköping, 13:15 (English)
Available from: 2011-02-23 Created: 2011-02-23 Last updated: 2016-05-04Bibliographically approved

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Nouira, Semir
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