Corporate venture and its impact on organizational effectiveness

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Corporate venturing or Corporate Venture Capital (CVC) is an activity in the business world that allows proprietors to have alternative ways in making their businesses grow. Corporate venturing is also one of the ways to start entrepreneurship. This is done by investors to gain benefits from the market place itself or from an established firm rather than relying on to self-strategy (Henderson, n.d).

Corporate venturing is done mostly by large firms that take equity stake in small but pioneering firm, to which it may also provide management and marketing expertise. Investments in corporate venture capital may be categorized into three: (1) hedging, which is the simplest one where proprietors try to look for another decision or selection when circumstances turn out to be the opposite of what the proprietor is expecting, (2) capability upgrading, which involves corporations that truly benefit from the starting businesses in a way that the capabilities inside those corporations are being improved in different aspects such as technology or market strategy, and (3) capability leveraging, in which corporations do have existing support to the starting business (Bastow, n.d).

Contributions of Corporate Venture Capital

Corporate Venture Capital brings proprietors several benefits. In fact, starting companies that are being financed by established business firms are really getting benefits from these corporations because what they need are money and investors or capitalists to make their business well-working whereas the corporate capitalists expect a good return on their business (Henderson,n.d).

One main goal of corporate venture capital is to improve in both strategic and financial aspects. Some corporate capitalists have this goal to gain financially though. But there are more capitalists who enter this kind of activity to make a progress in the business itself.

New businesses that have attached themselves to reputable business firms would gain an instant reliability and likewise, corporate capitalists would gain potential market.

Also, corporate venture capital firms have the best staff that are indeed developed and fully equipped with their role in the business. These staffs who are specialists can, in actuality, contribute a lot to the development of the start-up businesses. For example, managers in big business firms are undoubtedly the best in their craft and they probably have mastered every approach that is needed to have successful business. If these managers would be able to manage the start-up businesses through corporate venture capital, they would be able to apply their mastered skills and unquestionable knowledge in running a business to those start-up firms and eventually, make them successful (Hewitt, n.d).

Looking into this, we can safely say that, likewise, corporate venture capital firms get benefits from the start-up business as this activity is a way to increase the sales and profits of their own business. This is observable when one established firm supports a start-up business in the hope that they would be acknowledged by advertising or by acquiring new strategies and ideas that will contribute to its own growth.

Let's take a look at the Agilent Technologies. Agilent Technologies is tagged as "the world's premier measurement company" and was a part of Hewlett-Packard (HP) Company until 1999. Its primary goal is to make advancement in electronics, communications, life sciences and chemical analysis. In 2005, Agilent joint venture with Chengdu Instruments Division, a local instrument company in China. This venture made the local company use Agilent's world-class facility and thus, the rise of Chengdu Agilent Technological Base. Also, because of the business system in China, Agilent was able to develop and produce test equipment for China and eventually, the world market. Since the venture was successful, Agilent Technologies was able to make both companies productive and well-working. Had this venture failed, it is still a benefit because Agilent Technologies would be able to know what things should be avoided in that kind of business and accordingly, the company would identify the loss if there had any failure (Chesbrough, n.d).

Another remarkable example of illustration of benefits of corporate venture capital is the success of Microsoft. Microsoft is a multinational corporation that develops and manufactures products and services pertaining to computing or computers. Microsoft has invested in start-up companies that would enable its Internet services more advanced. .Net and Microsoft ventured giving way to the rise of Windows that provided a variety of Internet services. Because of this joint venture, .Net received instant fame and credibility because the start-up companies were attached to the name of Microsoft. Also, Microsoft gained an extraordinary benefit as the number of their sales increased versus the sales of rival companies like IBM and Sun Microsystems (Rigby, n.d).

All in all, corporate venture capital can be considered mutualism, a kind of relationship where both parties benefit from each other. Start-up companies need a huge amount of capital to stay in the business, a thing established business firms can support them. With this support, big business firms are able to look for newer target markets and therefore, increase their sales and profits. No doubt big business companies engage in this kind of activity, be it for strategic goal or financial goal.

Reference/s

Rigby, Darell. Bain & Company: Management Tools. Retrieved from

http://www.bain.com/management_tools/tools_venturing.asp

Henderson, James. Corporate Venture Capital: When it works and when it doesn't. Retrieved

from http://www.imd.org/research/challenges/TC075-07.cfm

Bastow, Geoff. Corporate venturing can nurture software success. Retrieved from

http://wistechnology.com/articles/3964/

Hewitt, Sarah. Weighing the Pros and Cons of Corporate Venture Capital Financing. Retrieved

from http://www.thelenreid.com/resources/documents/NJTC_05041.pdf

Chesbrough, Henry W. Making Sense of Corporate Venture Capital. Retrieved from

http://www.signallake.com/innovation/032002HBR_making_sense_of_corporate_venture_capital.pdf

http://www.agilent.com/about/companyinfo/history/timeline_2000s.html

http://www.startvbdotnet.com/dotnet/dotnet.aspx

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