Are corporate venture capital and R&D complements or substitutes? A process view of absorptive capacity

While both corporate venture capital (CVC) and R&D are essential vehicles for innovation, the literature has largely overlooked whether and when they act as complements or substitutes in generating firm innovation outcomes. Drawing on a process view of absorptive capacity, this paper argues that the CVC-R&D relationship depends on how firms coordinate knowledge acquisition, assimilation, transformation, and exploitation. Analyzing a sample of US firms engaged in CVC or R&D activities from 1993 to 2016, this paper finds that CVC and R&D act as substitutes in generating innovation outcomes. Furthermore, this paper finds that the substitutive relationship weakens when firms use formalized and dedicated CVC structures, and it shifts toward complementarity as firms accumulate CVC investing experience. This paper contributes to the CVC-R&D relationship literature by highlighting the role of absorptive capacity process coordination, and to the organizational learning literature by showing how experiential and deliberate learning mechanisms moderate this relationship.