FUTURE DIRECTIONS FOR INTERNAL CORPORATE VENTURING
Developing sound corporate venturing practices is a critical challenge for companies today. As scholars continue to develop empirical findings that contribute to our understanding of the drivers of ICV performance, there are a few key prescriptions that corporate managers would do well to remember as they initiate internal corporate venturing in their companies.
First, managers should remember that ICVs are essentially new businesses of their corporations. It may thus be unreasonable to expect that corporate parents will be able to add significant value to the operations of their ICVs. This is a fundamental reason why granting planning autonomy to new ventures may generally be good corporate policy. Stated differently, the newness of ICVs to their corporate parents creates opportunities for venture mismanagement on the part of the corporate parent's since parent knowledge of the drivers of success in the ICV's product-market arena will often be weak or poor.
Second, parenting advantage opportunities are created when corporations create ICVs whose products are similar to those of existing corporate businesses. The presence of parent-venture similarity suggests that the parent possesses knowledge that is potentially valuable to the ICV's operations. Under such circumstances, parental involvement becomes more desirable, and a hands-on approach to the ICV's operations by higher-level corporate managers may add value to the venture. As such, the common observation that diversification is most successfully accomplished when firms enter adjacent product-market spaces can be extended by recognizing that new business performance is not simply a matter of knowing where to operate relative to a firm's other business domains. Knowing when to get involved as a corporate parent and when to stay out of the strategic management of a new business is also critical.
Third, it is important to remember that top management support is one of the strongest determinants of ICV performance. Although top managers often fulfill the role of securing initial resources for the venture's start-up, top management support is also believed to have a direct effect on ICV performance. When an ICV has top management support, internal and external coalitions can be built and mobilized to strengthen support for the new business. In addition, there are often pressures within a parent company that prevent venture managers from changing plans. Support from top management in the parent corporation can offset these pressures.
There are many promising areas for future understanding of the internal corporate venturing process. For example, it remains unclear whether the parenting advantage considerations change as ICVs evolve. For example, "air cover" is often needed to shield ICVs from deleterious influences within the corporate environment.83 As ICVs mature, their demonstrated performance often makes them less vulnerable in the context of the larger corporation, making air cover less important to venture success.84 Among ICVs that have matured to the point where they are perhaps returning a profit to the parent corporation, it becomes increasingly important for the parent to consider how the ICV will be structurally integrated into the mainstream businesses of the company. In short, it is likely that parenting advantage considerations will evolve as ventures develop. Research that investigates the importance of these considerations across venture development stages will be of great theoretical and practical significance.
The effect of the motivation for creating of an ICV on subsequent ICV performance is a little-explored area of the internal corporate venturing process. As described earlier, ICVs are not founded exclusively with the motive of generating profits for the parent company. They may be created for learning purposes, to leverage latent resources of the parent company, or to simply increase the size of the parent company and secure greater job security and compensation for top executives. The motives for creating an ICV may not only define the intended outcomes by which ICV performance is measured, but also influence the amount of managerial attention given to the ventures and how they are managed. Consistent with the attention-based view (ABV) of the firm,85 managers direct their time and attention to the most strategically important initiatives in the firm. ICVs that are founded in competitive arenas or are of strategic importance to the parent corporation should thus receive more managerial attention than those founded for reasons with a basis in exploration or learning. Future researchers may consider the ABV to be a useful theoretical perspective when developing models of ICV performance, and when describing its implications to managers engaged in internal corporate venturing.
In conclusion, when corporations choose internal corporate venturing as a path to corporate growth and renewal, they are, by definition, diversifying into new business arenas. Concepts drawn from the corporate strategy literature on diversification, particularly those related to parenting advantage and adjacency, thus represent useful reference points around which an ICV performance model might be constructed. How to diversify through innovation is a critical challenge facing companies today. In response, executives are embracing corporate entrepreneurship as a critical path to firm success. In doing so, they promote entrepreneurial actions that result in innovations that renew firms, their markets, and their industries.