Core business prospects and the management of internal corporate ventures

Abstract

Abstract: Corporations with attractive core business prospects focus their attention on those core businesses and away from ICVs they may be pursuing, thus influencing how those ICVs are treated from a corporate parenting perspective and, in turn, how well they perform. Using data collected from 145 ICVs operating in 72 corporate parents, this research reveals that corporations with more attractive core businesses grant greater planning autonomy to their ICVs’ managers, and planning autonomy contributes to ICV performance. Additional results reveal the moderating effects within our structural model of venture manager experience and the similarity of the ICV’s product to those of other businesses within the corporation. Considered collectively, this research demonstrates why corporations that “need” their ICVs to be successful – because of poor prospects in their core businesses – are most likely to mismanage them. Unattractive core business prospects can be viewed as justifying corporate managers’ involvement in the direct management of their firms’ ICVs. However, venture planning autonomy is needed to avoid placing undue expectations on ICVs as the “saviors” of corporate performance. By extension, this need for autonomy is also anticipated to apply to other entrepreneurial contexts where experimentation and learning are significant concerns (e.g., business incubators, corporate venture capital investments, new venture divisions). Plain English Summary: This research demonstrates how and why corporations that have attractive core business operations are most likely to be good corporate parents to their internal corporate ventures (ICVs), and vice versa. In a sense, when it comes to internal corporate venturing, “the rich corporations get richer, and the poor corporations get poorer.” Parent corporations with more attractive core business prospects were found to grant greater planning autonomy to the managers of their ICVs, and autonomy is needed to give ICV managers the discretion and flexibility they need when navigating their ventures though unchartered business territory. Overall, this research demonstrates the importance of corporate managers (1) granting ICV managers autonomy in planning their venture operations, (2) being willing to consider engaging in internal corporate venturing even though their firms’ existing, core business operations may be attractive (i.e., before these ICVs “need” to be successful), and (3) not putting too much pressure on ICVs to “perform,” and avoiding meddling in the management of those ventures, when prospects in the corporation’s core business are unattractive. We argue that autonomy is likely efficacious in most entrepreneurial contexts where experimentation and learning are significant concerns (e.g., business incubators, corporate venture capital investments, new venture divisions).

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Small Business Economics

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