How Does Policy Uncertainty Affect Corporate Venture Capital Investments?

Firms’ use of corporate venture capital (CVC) investments has become one the most prominent ways in which firms strategically adapt to the changing environment, and understanding the associated drivers is important for both theory and practice. In this study, we examine how policy uncertainty affects CVC investment. We argue that policy uncertainty is positively related to the amount of resources committed to CVC investment. However, we also argue that firms that are more dependent on government spending and firms with higher R&D intensity attenuate the positive relationship between policy uncertainty and CVC investment. Using data on CVC investments made by U.S. publicly traded firms from 1997 to 2020, we find empirical results supporting our theoretical arguments. Our study has important implications for entrepreneurship and innovation.