Corporate Venturing, Allocation of Talent, and Competition for Star Managers

We provide new rationales for corporate venturing (CV), based on competition for talented managers. As returns to venturing increase, …rms engage in CV for reasons other than capturing these returns. First, higher venturing returns increase managerial compensation, to which …rms respond by increasing the power of incentives. Managers increase e¤ort, prompting …rms to reallocate them to new ventures, where the marginal product of e¤ort is highest. Second, as returns to venturing become large, CV emerges as a way to recruit/retain managers who would otherwise choose alternative employment. We derive several testable empirical predictions about the determinants and structure of CV. (JEL Codes: G24, G32, M13, M12)