We study the effect of product market competition on the propensity to use corporate venture capital (CVC) as a part of an information technology (IT) firm's innovation strategy. Using novel measures of product market competition based on product descriptions from firm 10-K statements and accounting for potential endogeneity, we investigate how product market competition between 1997 and 2007 relates to the magnitude of CVC spending. We first find that firms in competitive markets make higher research and development (R&D) and CVC investments. In addition, we find that increasing product market competition leads to a shift away from internal R&D spending and into CVC. These movements are significantly stronger for technology leaders, i.e., firms with deep patent stocks, in the IT industry. We also find that CVC appears to be an effective way of exploiting external knowledge for technology leaders in the IT-producing industry, but not for technology slow starters. CVC investments lead to significantly more patent applications for technology leaders but no appreciable difference for slow starters. Our results provide new insights for theories of innovation in competitive, dynamic markets, potentially as part of a portfolio that includes internal R&D as well as open innovation models.
Human capital is becoming more critical as the global economy becomes more information intensive and service intensive. Although information systems (IS) researchers have studied some dimensions of human capital, the role of industry-specific human capital has remained understudied. The information technology enabled business process outsourcing (BPO) industry provides an ideal setting to study returns to human capital, because jobs in this industry are standardized and many professionals in this new industry have come from other industries. We build on IS and economics literature to theorize returns to human capital in the BPO industry, and we test the theory using data for over 2,500 BPO professionals engaged in call center work and other nonvoice services (e.g., accounting, finance, human resources, etc.) in India during the 2006–2008 time period. We find higher returns to industry-specific human capital than to firm-specific and general human capital. We also find that junior-level professionals, whose jobs are relatively more standardized, have higher returns to industry-specific human capital than senior-level professionals. We discuss implications for further research and practice in the global economy where inter-industry transfers and migration of skills are becoming increasingly common.