National Science Foundation Grant Funds Study of Corporate Equity Investing

Charles H. Lundquist College of Business Professor Alan Meyer, Ph.D., received a $65,000 seed grant from the National Science Foundation (NSF) to investigate corporate equity investing in start-up ventures. The exploratory study, "Corporate Venture Capital: Innovation Through Equity Investment," will be conducted in partnership with ten prominent Fortune 500 technology corporations, four venture capital firms, and two firms that organize corporate venturing conferences and provide databases. Meyer's proposal was one of twelve funded by the NSF from eighty applications submitted by academic and research institutions from throughout the United States.

"Many corporations are externalizing their research and development efforts by cutting back on in-house R & D activities and substituting direct investment in start-up companies," Meyer said. "Corporations pursue venturing in search of both financial and strategic returns. Most companies, however, cite strategic objectives as the main reason for setting up venturing programs. These programs open a window on emerging technologies and new business models."

Meyer is the Charles H. Lundquist Professor of Entrepreneurial Management and the academic director of the Lundquist Center for Entrepreneurship, one of the most prominent centers of its kind. The research will conceptualize Corporate Venture Investing (CVI) as an adaptive response to changes in a corporation's technological and financial environments. CVI has significant implications for organizational change, technological innovation, and organizational learning.

"In recent years, the venture capital industry has been highly successful in identifying promising new business opportunities, accelerating the progress of new ventures through the early developmental stages, and helping start-ups achieve liquidity," Meyer said. "Consequently, leading technology companies have sought to stimulate corporate innovation and growth through the creation of internal venturing units modeled on the practices of venture capitalists."

In 1999, more than 400 U.S. corporations made direct investments in small entrepreneurial start-ups, and over 200 corporations reported having established formal CVI programs. During the first three months of 2001, corporate venture capital investing fell 81 percent. Meyer's research will try to pinpoint factors that enable some corporate venturing programs to survive the inevitable shakeout, while others are shut down.

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