This study examines whether firms increase their investment in startups using Corporate Venture Capital (CVC) when they reduce internal research and development (R&D) spending to meet short-term earnings targets. My findings suggest that firms are more likely to make CVC investments when they just meet or beat analysts’ earnings forecasts and have lower than predicted R&D expenses. The effect is particularly concentrated in firms with lower transient investor ownership, firms with long-term oriented CEOs, and firms with more exploitative innovation strategies. Subsequently, firms that make CVC investments during R&D-cutting and benchmark-beating years have superior innovation outcomes and better long-term performance than those that cut R&D but do not make CVC investments. My findings suggest that managers utilize CVC investments to mitigate the negative impacts of cutting internal R&D and highlight the importance of considering external innovation efforts in addition to internal R&D in future studies.