Seeding a Star or Constructing a Constellation? Corporate Venturing as an Ecosystem Strategy

Four of the five largest companies by market capitalization (Apple, Alphabet (Google), Amazon and Facebook) were merely fledgling startups a couple of decades ago. Their success is attributed to the platform each firm has successfully developed and scaled. Accordingly, there is a surge in the number of established corporations investing in startups to develop an ecosystem around their own platform. The Corporate Venture Capital (CVC) literature, however, is predominantly ignorant of these efforts. Rather, it envisions CVC as a window on disruptive technologies. We document the presence of heterogenous CVC objectives using a unique data of almost 300 CVCs' announcements. Our analysis captures an increase in the number of ecosystem-development CVC units. We also find that Ecosystem-CVCs experience superior short- and long-term performance, in comparison to CVCs with a different objective. Out study advances a new view of corporate venturing; as an ecosystem-development tool constructing a constellation of related startups, rather than the prevailing view of CVC as a tool for seeding and assimilating knowledge from a disruptive startup.