A critique of the linear approach in corporate venturing

located within or rooted inside the borders of a nation state” (Lundvall, 1992: 2)

This concept has emerged in recent decades, especially in work that seeks to define the composition of innovation actors. Other strands within the systems approach are represented by, e.g., sectoral systems of innovation (Malerba, 2002), regional systems of innovation (Cooke, 1996, 2002) and technological systems of innovation (Carlsson et al., 2002).

The system rests on the ability of all actors to collaborate and interact. Interaction is assisted through nearness and collaborative initiatives; joint research activities and licensing agreements between public and private sector actors. In the system approach, private sector actors can access and exploit the pure science competencies generated in public organizations and institutions and the public sector can realize the transfer and application of its technology into new commercial products. The national system of innovation framework argues that such a system creates, stores, and transfers information, knowledge and skills to technologies and new innovative projects.

Although academics and policy makers employ different definitions and perspectives to the system approach, the basic premise is interaction. This includes understanding the linkages between the actors involved in innovation.

After reviewing the innovation models, which counteracts and complements the linear approach in different ways, an obvious next step is to analyse the early phases of corporate venture firms in a different, non-linear light. This draws on these critical frameworks to different degrees, and creates new analytical approaches to the early phases of the corporate venture process by these means.

A large proportion of the founding literature on corporate venturing uses the planning and development perspective from strategic management (e.g. Block, 1982, Block and MacMillan, 1993). The venture capital process descriptions also have their basis in this tradition, also known as the planning school, which focuses on how decisions are supposed to be made and carried out in a sequential order (Block and McMillan, 1993; Bygrave and Timmons, 1992; Gorman and Sahlman, 1989; Fried and Hisrich, 1994; Timmons and Bygrave, 1986; Tyebjee and Bruno, 1984). This school of thought describes how decisions are carried out, but not as often as how and by whom they are made.

The process literature was developed for analysing large corporations which operated in relatively certain environments characterised by incremental change in production processes and products. The corporate venture literature applies the same approach to analyse the emergence of new firm formation under conditions of high uncertainty with challenging demands from both entrepreneurs and investors. In this context the planning approach carries several disadvantages.

It lacks flexibility, neglects the complication of implementation, presumes that the firm is managed from the top down and distinguishes between planners and managers, and is not well suited for taking into account discontinuities (Mintzberg, 1998). While theses, processes can work well for building firm strategies in stable environments, they are problematic when used for managing dynamic entrepreneurial developments.

Yet another important complication of the process approach in a corporate venture context is that it presumes that new venture firms develop according to predictable stages along the value chain (Ruhnka and Young, 1987). The “process” literature describes the development of new venture formation where the venture goes through a predictable lifecycle (Bhave, 1994; Birley, 1984).

These lifecycles are described chronologically as a natural progression that constitutes the maturation of new venture firms. A contradicting academic view, however, argues that ventures do not always develop in a linear and relatively sequential process (Hansen and Bird, 1997;

Reynolds and Miller, 1992; Ruhnka and Young, 1987). This argument goes hand in hand with the previous critique of the linear model. Authors with this view argue that task accomplishments in new ventures may happen chronologically, but are just as likely to occur in any random order (Kline and Rosenberg, 1986). Also, Wright and Robbie (1998) argue that a clear gap exists in the process literature, which neglects the dynamics of the venture development process. This tradition argues that while some steps in the process may be included in the venture’s development, others will not. One thing is clear, and that is the process seldom develops chronologically. These changes happen as discontinuities in the venture’s development.

There is a multitude of examples to illustrate the significant changes entrepreneurial ventures experience from the initial discovery of opportunities to the final business. Similar evidence of

changes exists when the entrepreneurial team finally captures the attention of future investors.

When investors engage in investments it is common knowledge that deadline, milestones and new strategic directions all influences the new venture in new and unpredictable directions; these factors will direct the young ventures in new directions which are different from the natural predictable progression. This perception also opens for a new interpretation of the strategy for corporate venture firms, which is highly dependent on the development of new venture firms.

When the development of the venture is more unpredictable, corporate ventures need to be involved in the early part of this process to provide direction and predict the outcomes.

Corporate ventures can not predict a natural progression but must reach back in the value chain to acquire knowledge for future decision-making about the research intensive new ventures. This further accentuates both the early phase focus and a new dynamic approach to understand corporate venturing.

This thesis argues that literature on corporate venture firms, like the scientific research community on innovation, have to break with the linear model and open up to a more interactive involvement particularly in the early phases of the venture process. Corporate venture firms are part of the ”innovation ecosystem” and must therefore also be analyzed as part of the innovation process. As emphasised in the previous chapters, there is conceptual, empirical and theoretical evidence that indicates that a complementary academic focus on the early phases of the venture development process could also be valuable for corporate ventures. The early phases focus less on the maturity and development of the ventures and to a greater extent on the type of involvement that is needed from corporate ventures when including the innovative process at the beginning of a venture’s life.

The analysis builds on new models of innovation, and therefore introduces a new way of seeing and developing corporate venture strategies. While this view acknowledges that specific tasks are included in corporate venturing it interlinks them and connects them in ways that does not necessarily follow sequentially (Burgelman, 1996; Wright and Robbie, 1998). By contrast to many other previous corporate venture models this thesis develops its analyses in a non-linear light. Study V (Vintergaard and Husted, Submitted) however makes the claim linear dimensions also in some cases proves valuable to provide direction for decision-making, safe resources etc.

As a challenge to the linear pipe-line perspective on corporate venturing, this thesis studies the ability to create, discover and evaluate original investment opportunities using an interactive approach. The knowledge creation process needed to accomplish activities is of particular interest to this thesis and its studies. In the following chapter a literature review will be

conducted of the early phase. This review will address to early phases of the venture process from a knowledge and network perspective. The review will create a broader foundation for the studies in the subsequent section. Drawing on this review the studies develop their arguments in more detailed and narrow way.

2. REVIEW OF THE EARLY PHASES: A DYNAMIC