Abstract
Entrepreneurial companies are a vital source of innovation and are financed by investors with different profiles. We examine whether the innovative outputs of entrepreneurial companies are responsive to access to complementary resources from different types of venture capital (VC) funds: "independent venture capital (IVC) and corporate venture capital (CVC)". We then delve deeper and examine the mechanisms by which we measure if access to investors' complementary resources has an influence on the innovation performance of the companies they fund. Our sample consists of 1547 U.S. biotechnology companies founded between 1998 and 2013 and financed by IVC or CVC funds. We find that CVC-backed companies display higher rates of innovation output, as measured by their patenting outcomes, than their IVC-backed counterparts. We specify three mechanisms that affect the influence of complementary resources of corporate investors compared to those of IVC: (1) absorptive capacity enhances the ability of the company to grasp and utilize investor knowledge; (2) business similarity helps nurture the technologies of innovative companies, and (3) geographic proximity enables approachability.