Family Control and Corporate Venture Capital : An Unorthodox Investment Approach

Despite the prevalence of publicly-traded family firms around the world, the issue of how family control can affect the corporate venture capital (CVC) investment strategy of firms in technology sectors has remained mostly unknown. Drawing on socioemotional wealth and agency theories, we argue that family-controlled firms (FCFs) are less prone to implement CVC programs than non-FCFs counterparts and, when they do, FCFs follow an unorthodox investment approach. We posit that CVC can affect a family’s socioemotional endowments, leading FCFs that participate in CVC programs to make fewer but larger CVC investments than non-FCFs to enhance family control over the start-ups and focus on less risky start-ups at later stages of their development. We also argue that the board composition in terms of independent directors limits the capacity of FCFs’ to incur SEW-driven CVC investment behavior. We test our hypotheses using a sample of 256 firms listed on the U.S. stock market from three technologically-intensive sectors. Empirical results are consistent with most of our hypotheses