23022: Motivations for Venture Financing in a Nascent Market: Exploring Synergies Beyond Technological Fit (session 25943)

This study explores entrepreneurial motivations driving established firms' financing of ventures in a nascent market. Prior research emphasizes the importance of matching ventures’ technological propositions with investors' operational capabilities. However, in nascent markets, characterized by uncertainty and evolving boundaries, such matches are less pronounced. Instead, we find that firms focus on how ventures can leverage their capabilities to become marketable, revealing that perceived affordances often stem from ventures' deficiencies rather than strengths. Using a dataset of 410 purchase announcements and contracts between incumbents and innovative ventures in a nascent market for carbon removal, we adopt an opportunity-creation lens to uncover how corporate buyers strategically engage with ventures. Our findings reveal four distinct strategies: legitimizing, pioneering, market-making, and signaling. These strategies demonstrate how established firms co-create opportunities by addressing ventures’ unique needs and aligning them with long-term strategic ambitions, even without ownership stakes. This study contributes to corporate venturing literature by challenging traditional frameworks of venture selection and extending the affordance reasoning to non-equity contexts. Practically, we provide insights for firms on leveraging their capabilities to maximize impact in nascent markets, transitioning from asset users to active participants in fostering emerging market opportunities.

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