A dynamic perspective of internal fit in corporate venturing

Managers of corporate parents and their Ventures have long been faced with the question of how closely to tie the parent and venture. A close connection may enable a venture to capitalize on the competencies and resources of the parent. However, venture autonomy could prevent corporate inertia and bureaucracy from constraining venture growth. The lack of consensus on this issue leads us to the first of two complementary research questions that we address in this paper: "What is the effect of internal strategic fit between corporate parent and its venture on venture performance?'' We suggest that a tight fit is positively associated with venture performance because of the venture's access to its parent's resources. Managers and researchers alike have often observed that growing enterprises are dynamic entities. In the case of corporate ventures, this implies that the relationship between parent and venture evolves over time. Our second research question directly addresses this issue by asking: "Does the relationship between a corporate parent and its venture(s) evolve over time, and if so, how?" We identify two dimensions of the fit between corporate parents and their ventures: relational and economic. A relational fit reflects organizational culture and structure, while an economic fit is a function of the needs of the venture and the resources of the parent. We develop a series of hypotheses and test them with survey data from 97 Canadian corporate ventures. For the purposes of this study, we define success as the ability of a firm to meet internal milestones on schedule. We find that the degree of fit between a corporate parent and its venture does affect the success of a venture, and that success is associated with high levels of awareness, commitment, and connection. Further, the relational dimension of the parent-venture interface appears to have a greater association with venture success than does the economic dimension. Our data support the idea that the parent-venture relationship is dynamic in nature as ventures in our Sample generally lessened their economic connections with their parents as they matured (or vice-versa). We did find, however, that the relational bonds remained more or less intact. The exceptions to general trends were an increasing emphasis on financial targets along with decreasing CEO involvement as ventures matured Both of these findings make intuitive sense. Greater financial independence is accompanied by greater financial accountability. And, as a venture gains in both independence and accountability, there is less need for the CEO to provide "air cover." These two issues aside, the basic model of enduring relational ties and diminishing economic ties was supported As well, the increasing accountability is consistent with our expectation that a close connection is preferable to high venture autonomy. (C) 2000 Elsevier Science Inc.