corporate venturing

THREAT OR STRENGHT ? Corporate venturing behavior is generally related to innovative activities. Creating a corporate venture is a useful choice for firms interested in entering new businesses by expanding operations into new or existing markets (Guth &Ginsberg,1990; Zahra 1993, 1995, 1996). Through corporate ventures, a company can invest in new products or technologies by funding businesses that have a fairly autonomous management team, with the goal of developing new products or services that expand the core business, enter new industries or markets, or develop breakthrough technologies that could substantially change the industry. Yet, when developing a new venture, a company faces the problem of striking a balance between autonomy and control. Creating a corporate venture can be done in one of two ways: by building a new business as a stand-alone unit (external corporate venture), or by building a new business inside the existing firm whose structure allows for management independence (internal corporate venture). Previous research (Burgelman, 1984, Burgelman and Sayles, 1986) has argued that strategic relatedness is key in the decision to keep a corporate venture internal. Scholars who take a resource-based perspective contend that firm-specific resources and relatedness are important variables in the choice of growth and diversification (Mahoney & Pandian, 1992; Peteraf, 1993). However , we don't actually know the drivers of the decision to spin off or to keep the corporate venture from the perspective of the managers who make these decisions.I believe the effect of the new venture on the strategic position of the firm is a prime determinant of the choice to internalize the corporate venture so managers tend to internalize corporate ventures that may threaten the firm’s strategic position and externalize those that do not. Current organizational theory offers two