The Hidden Agenda behind Markets for Technology

Abstract

In this paper, I aim to better understand why firms enter inter-organizational relationships. Previous studies have shown that firms engage in partnerships to internalize knowledge from its partners. I propose that firms form inter-firm ties to acquire knowledge from their partner's R&D portfolio as well. Using VentureXpert and SDC Platinum databases, my findings show that Corporate Venture Capitals (CVCs) are more likely to invest in an entrepreneurial firm with an R&D partner over one without. Further, I find that my baseline findings are stronger in industries with weak intellectual property protection (IPP) regimes and when the venture firm's alliance partner operates in a similar industry with the CVC. To resolve endogeneity issues, I provide an additional analysis differentiating investor types. My paper indicates that, under certain contingencies, firms do engage in inter-firm relationships to learn from the partner's R&D portfolio.