Learning While Innovating: The Abandonment of Corporate Venture Capital Programs

This paper investigates the abandonment of an administrative innovationcorporate venture capital (CVC) programs by information technology (IT) corporations. CVC programs are modeled upon the venture capital (VC) practices of finding, funding, and guiding entrepreneurial startups. We draw upon prior research on organizational learning and innovation diffusion to empirically examine the role of innovation related experience and of inter-organizational contagion on organization’s decision to abandonment an innovation. We find that direct experience with the CVC programs decreases the likelihood of its abandonment by a focal organization. We also find that abandonments by industry peers are contagious and bias firms towards abandonment. More importantly, we evaluate the relative influence of experience vs. contagion and find that organizations’ with greater experience and a richer understanding of the CVC program are less susceptible to contagion influences.