Revisiting the Limited Liability of Corporate Venture Capital

Abstract

In this paper, we point out the inherent conflict between the corporate values of large companies and the venture capital (VC) values in the increasing Corporate Venture Capital (CVC) activities in Japan in recent years. CVC refers to the activities where business corporations invest in startups through equity for strategic purposes. We highlight that this conflict leads to a situation where while business corporations have incentives to actively participate in decision-making, their deeper involvement also raises litigation risks. It is noted that practitioners in Japan may not fully recognize these risks, and thus, we aim to provide managerial insights on this matter.