HOW DO CORPORATE VENTURE CAPITALISTS DO DEALS? AN EXPLORATION OF CORPORATE INVESTMENT PRACTICES VANGELIS SOUITARIS 1,2 * and STEFANIA ZERBINATI 1 1 Cass Business School, City University London, London, United Kingdom 2 LUISS University, Rome, Italy How do corporate venture capitalists (CVCs) do deals? Conversations with CVCs suggest that the putative view of venture capital investing is incomplete. We draw on 13 cases of CVC programs to document eight ‘corporate investment practices’ that are unique to CVCs. These practices reflect pressure on the CVC units for strategic fit and engagement with the corporation and also an opportunity to utilize parental resources. We then show that CVCs vary their emphasis on corporate investment practices, diverging into two distinct investment logics, ‘integrated’ versus ‘arm’s-length.’ Focus of isomorphism on internal versus external stakehold- ers explains the emergence of the two logics. Copyright © 2014 Strategic Management Society. ‘We have one limited partner in our fund and we’ve got to make sure we keep them happy, and that is very different to an independent VC.’ (K1, Kappa). INTRODUCTION Corporate venture capital (CVC) is defined as minor- ity equity investments by established corporations in privately held entrepreneurial ventures (Dushnitsky, 2012). CVC represents an important and growing source of capital for entrepreneurs. Whereas inde- pendent venture capital (VC) funds declined during the 2000 to 2010 decade (Ghalbouni and Rouzies, 2010), corporate venture capital has shown an upswing. As CVC activity has grown since 2005, so has academic interest in the phenomenon (Dushnitsky 2012; Hill et al., 2009; Keil, Autio, and George, 2008; Maula, 2007). This study documents and explains aspects of the CVC investment process that diverge from standard practices of independent venture capitalists (VCs). The venture capital literature identified a series of stages within a VC deal, such as deal origination, screening, and structuring (Wright and Robbie, 1998; Gompers and Lerner, 2004; Fried and Hisrich, 1994; Tyebjee and Bruno, 1984), and then described and explained specific practices within each stage, such as syndication and staging (e.g., Gompers and Lerner, 2004). We argue that the current theory, framed around independent VCs, is not well suited to fully explain the investment practices of CVCs for two reasons: first, CVC units typically have a single, dominant, limited partner, who owns the unit and provides all the funds (the parent corporation). Instead, independent VCs typically raise a fund from multiple, nondominant, limited partners. Second, the limited partner of CVC units (a corporation) typi- cally seeks both financial and strategic benefits. In contrast, the limited partners of independent VCs are investors typically interested only in financial returns. More broadly, since corporate ventures differ in their practices from independent ventures (Narayanan, Yang, and Zahra, 2009; Shrader and Simon, 1997), we expect CVC investment practices Keywords: corporate venture capital; investment practices; focus of isomorphism; institutional logics *Correspondence to: Vangelis Souitaris, Cass Business School, City University London, 106 Bunhill Row, London EC1Y 8TZ, U.K. E-mail: v.souitaris@city.ac.uk Strategic Entrepreneurship Journal Strat. Entrepreneurship J., ••: ••–•• (2014) Published online in Wiley Online Library (wileyonlinelibrary.com). DOI: 10.1002/sej.1178 Copyright © 2014 Strategic Management Society