Harvesting or Nurturing? Corporate Venture Capital and Startup Green Innovation

Corporate venture capital (CVC) has been shown to influence portfolio firm behavior and outcomes. However, the current urgency of both corporations and the venture capital market to address global sustainability challenges, e.g., develop solutions to mitigate climate change, has raised a new previously unanswered question of what role CVC plays in startup green innovation. To address that question, we examine young innovative ventures in Europe that received VC investments from 2004 to 2019 and employ multiple methods to distinguish the selection and nurturing effects of CVC investors on venture green innovation. Regarding selection effects, our findings reveal that CVC investors select greener ventures, with this effect being more substantial for CVCs with parent firm green innovation (green CVCs). Regarding nurturing effects, overall, we find no evidence of CVCs increasing the green innovation of their portfolio firms after the initial investment. However, not all CVCs are alike, and green CVCs add to the venture's green innovation beyond their selection effects compared to nongreen CVCs. We discuss the implications of these findings through post-hoc analyses and by leveraging additional qualitative insights from interviews conducted with startup founders and CVC investors.