Driven by ever-increasing equity market valuations and growth challenges, many large corporations are bestirring themselves to build new enterprises that have the potential to grow much faster than their core businesses. Yet in doing so, senior managers at the parent companies often make the same well-intentioned mistake that children do with their first goldfish: overfeeding.

It seems to be common sense that if you seriously want to build a business quickly, you shouldn’t skimp on funding and other resources. Many senior managers believe that the financial and technical support the parent corporation gives to its start-ups is their main source of competitive advantage.

Although this is often the case when companies invest in projects to extend core businesses in familiar or strongly related markets, when they invest in new businesses the opposite may well be true. Apple’s Newton personal digital assistant (PDA), General Electric’s "factory of the future," and a host of other unsuccessful new ventures show that lavishing capital does not guarantee success.

In fact, bestowing too many resources on new ventures undermines the discipline they need to grow. Excessive amounts of capital can make the managers of a new venture expand its product range too quickly, invest...