Making Sense of Corporate Venture Capital

Research-Technology Management, July-August, 2002

Henry W. Chesbrough; Harvard Business Review, March 2002, pp. 90-99.

In a 2000 article he wrote with Stephen Socolof for Research * Technology Management ("Creating New Ventures from Bell Labs Technologies," March-April 2000, pp. 13-17), Henry Chesbrough observed that Lucent's New Venture Group had the potential to engender greater entrepreneurship within Lucent and to expand its range of business models for commercialization. In this article, he updates the progress the New Ventures Group has made and the benefits it has brought to Lucent. He also presents a framework to help a company decide whether it should invest in a particular start-up by first understanding what kind of benefit it might realize from the investment. With examples from Bell, Intel, Lucent, Merck, and others, the framework explains why certain types of corporate VC investments proliferate only when financial returns are high, why other types persist in good times and in bad, and why still others make little sense in any phase of the business cycle. The article describes four types of corporate VC investments, each defined by its primary goal--strategic and financial--and by the degree of operational linkage between the start-up and the investing company.