Recent regulatory changes in the German financial system shifted corporate control activities from universal banks to other capital market participants. Particularly hedge funds took advantage of the resulting control vacuum by acquiring stakes in weakly governed and less profitable firms. We document that, on average, hedge funds increased shareholder value in the short‐ and long‐run. However, more aggressive hedge funds generated only initially higher returns and their outperformance quickly reversed, whereas non‐aggressive hedge funds ultimately outperformed their aggressive peers. These findings suggest that aggressive hedge funds attempt to expropriate the target firm's shareholders by exiting at temporarily increased share prices.

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This article analyzes, from a finance perspective, various approaches to commercializing ideas and innovation. It includes an analysis of private and corporate venture capital and other corporate venturing activities such as strategic alliances and mergers and acquisitions (M&A) as well as recent financial innovation. The article is organized as follows. First, it analyzes the relationship between venture capital and innovation, and then focuses on the exit and growth opportunities of venture backed firms. Next it explores corporate venturing activities, examining strategic alliances and M&As as alternatives for acquiring new ideas and innovation. It outlines more recent approaches for funding and commercializing innovation before concluding.

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