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Funding Fever: How Venture Capital Type Shapes Post-IPO Outcomes in Biotechnology

Elderot, Linn LU ; Johansson, John LU and Schatz, Samuel LU (2025) IBUH19 20251
Department of Business Administration
Abstract
This study aims to investigate how corporate venture capital (CVC) and independent venture capital (IVC) influence innovation and financial outcomes in biotechnology firms following their initial public offering (IPO), and how factors like technological fit and failure tolerance mediate innovation outcomes. Using a sample of US-based biotechnology firms that completed IPOs between 2010 and 2020, we conduct parametric tests and regression analyses based on patent data, investor type, and industry-adjusted stock returns. Our results suggest that investor identity plays a significant role in shaping the innovative trajectories of newly public biotechnology firms. We find that CVC-backed firms produce significantly more patents in the three... (More)
This study aims to investigate how corporate venture capital (CVC) and independent venture capital (IVC) influence innovation and financial outcomes in biotechnology firms following their initial public offering (IPO), and how factors like technological fit and failure tolerance mediate innovation outcomes. Using a sample of US-based biotechnology firms that completed IPOs between 2010 and 2020, we conduct parametric tests and regression analyses based on patent data, investor type, and industry-adjusted stock returns. Our results suggest that investor identity plays a significant role in shaping the innovative trajectories of newly public biotechnology firms. We find that CVC-backed firms produce significantly more patents in the three years following IPO compared to IVC-backed firms. However, we find no evidence that CVCs exhibit higher failure tolerance or that technological fit enhances the innovation output of CVC-backed firms. While failure tolerance is positively associated with patenting activity, it does not appear to be a distinguishing feature of CVCs, potentially due to the high-risk characteristics of the industry. Moreover, we find no significant relationship between investor type and post-IPO financial performance. These findings provide novel empirical evidence on the post-IPO effects of CVC versus IVC backing and contribute to the VC literature by highlighting the need for other mediating mechanisms explaining the difference between the two investor types in post-IPO outcomes in this industry. (Less)
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author
Elderot, Linn LU ; Johansson, John LU and Schatz, Samuel LU
supervisor
organization
course
IBUH19 20251
year
type
M2 - Bachelor Degree
subject
keywords
Corporate Venture Capital (CVC), Independent Venture Capital (IVC), Technological Fit, Failure Tolerance, Biotechnology, post-IPO
language
English
id
9204723
date added to LUP
2025-06-26 08:43:10
date last changed
2025-06-26 08:43:10
@misc{9204723,
  abstract     = {{This study aims to investigate how corporate venture capital (CVC) and independent venture capital (IVC) influence innovation and financial outcomes in biotechnology firms following their initial public offering (IPO), and how factors like technological fit and failure tolerance mediate innovation outcomes. Using a sample of US-based biotechnology firms that completed IPOs between 2010 and 2020, we conduct parametric tests and regression analyses based on patent data, investor type, and industry-adjusted stock returns. Our results suggest that investor identity plays a significant role in shaping the innovative trajectories of newly public biotechnology firms. We find that CVC-backed firms produce significantly more patents in the three years following IPO compared to IVC-backed firms. However, we find no evidence that CVCs exhibit higher failure tolerance or that technological fit enhances the innovation output of CVC-backed firms. While failure tolerance is positively associated with patenting activity, it does not appear to be a distinguishing feature of CVCs, potentially due to the high-risk characteristics of the industry. Moreover, we find no significant relationship between investor type and post-IPO financial performance. These findings provide novel empirical evidence on the post-IPO effects of CVC versus IVC backing and contribute to the VC literature by highlighting the need for other mediating mechanisms explaining the difference between the two investor types in post-IPO outcomes in this industry.}},
  author       = {{Elderot, Linn and Johansson, John and Schatz, Samuel}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Funding Fever: How Venture Capital Type Shapes Post-IPO Outcomes in Biotechnology}},
  year         = {{2025}},
}