An evaluation of the relevance of corporate venture capital investment as a means for diversified high technology concerns to sustain competitiveness

Diplomarbeit von Karsten Jennissen

Abstract:

This paper evaluates how corporate venture capital investment can contribute to sustaining the competitiveness of large high technology concerns. In the first section the author sets the framework by explaining terminology in the context of technolgy and innovation as well as the market for technology companies. In addition, general issues regarding technology companies and their market environment are discussed.

To obtain a means of evaluation, then issue of competitiveness of high technology concerns in the current market situation is examined in general. Competitiveness is discussed and explained by reviewing a substantial amout of literature along a framework developed by Feurer and Chaharbaghi. The chapter culminates in developing an approach to sustaining competitiveness for high technology concerns. As the aspects that determine competitiveness cover a broad spectrum, this section is the main part of the paper.

Once an approach to sustaining competitiveness has been developed the third and last part examines in which way the efforts of high technology concerns to sustain competitiveness are advanced by corporate venture capital investment. Essentially, the conclusions drawn do not negate the effect of corporate venture capital, but set a limited and consise scope for corporate venture capital investment.

Table of Contents:

	List of abbreviations	5
	List of figures	6
	List of tables	7
A.	Introduction and methodology	8
B.	Basics regarding technology and high technology concerns	10
I.	Definitions and characteristics of technology and the technology market	10
1.	Science and research	10
2.	Technology	10
3.	Technique	13
4.	Types of research	14
5.	Innovation	14
6.	The concept of core technology	15
7.	Technology S-curve and life-cycle	16
8.	Technology intensity	19
9.	Customers	22
10.	Technology companies	24
11.	The field of research „management of technology”	25
12.	The scope of this paper	26
II.	Target firms and the high technology market	26
1.	Market trends	27
2.	Strengths and weaknesses of target firms when compared with other types of technology companies	28
a.	Weaknesses	28
b.	Strengths	29
3.	Window on technology	29
4.	New technologies and new markets	32
C.	Competitiveness	33
I.	Customer values	34
1.	Real option values for customers	36
2.	Competitive values	38
II.	Shareholder values	40
1.	Real option values for shareholders	42
2.	Relation of customer and shareholder values	42
III.	The ability to act and react and the dynamism of the competitive environment	43
1.	External organisational structures	43
2.	Monopoly effect of innovation	45
3.	Innovation and value creating business processes	47
a.	General issues	47
b.	Development process	49
c.	Additional considerations to raise the customer value	50
d.	Market introduction and diffusion	51
4.	Reducing the threat by competitors’ technologies	53
5.	Dealing with shareholder pressure	54
IV.	Developing a competitiveness approach for target firms	55
1.	Competitive intelligence	56
2.	Competitive support and education	58
3.	Shareholder communication	58
4.	Research	59
5.	Capability to focus development	60
6.	Organisation structures and culture	60
7.	Interdependencies	62
8.	Investment levels	66
D.	Corporate venture capital and competitiveness	68
I.	Basics of corporate venture capital	68
1.	Definition and differentiation	68
2.	Types and internal organisation of CVC investment	69
3.	Characteristics of the investment process	71
a.	Finding suitable investments	71
b.	Portfolios	72
c.	Maintaining investments	72
d.	Developing investments and divesting	73
II.	Corporate venture capital investment and sustaining competitiveness	73
1.	Potential benefits of corporate venture capital	73
2.	Potential problems of corporate venture capital	78
3.	How benefits and problems relate to competitive investments	79
4.	Conclusions about CVC investment and sustaining competitiveness	82
	Bibliography	86