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Big Tech platform acquisitions of start-ups and venture capital funding for innovation

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  • Prado, Tiago S.
  • Bauer, Johannes M.

Abstract

This paper investigates the effects of “Big Tech” platform acquisitions on venture capital (VC) funding for start-ups. We analyze 32,367 venture capital deals between 2010 and 2020, and 392 tech start-up acquisitions by Google, Facebook, Amazon, Apple, and Microsoft. Results obtained with fixed effects panel and differences-in-differences estimators reveal a positive, statistically significant, average effect of Big Tech start-up acquisitions on worldwide, venture capital activity. Positive effects were also found for the United States and Europe. However, the findings suggest that the effects are transient and fade away after several quarters. Because venture capitalists fund start-ups to enable entrepreneurial innovation, this approach also informs our understanding of the repercussions of these acquisitions on the start-up innovation ecosystem. The large number of observations over an extended period unlocks insights into historical patterns that are relevant for the design of digital platform policies.

Suggested Citation

  • Prado, Tiago S. & Bauer, Johannes M., 2022. "Big Tech platform acquisitions of start-ups and venture capital funding for innovation," Information Economics and Policy, Elsevier, vol. 59(C).
  • Handle: RePEc:eee:iepoli:v:59:y:2022:i:c:s0167624522000129
    DOI: 10.1016/j.infoecopol.2022.100973
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    Cited by:

    1. Jin, Ginger Zhe & Leccese, Mario & Wagman, Liad, 2023. "How Do Top Acquirers Compare in Technology Mergers? New Evidence from an S&P Taxonomy," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. Jean-Michel Benkert, Igor Letina, Shuo Liu, 2023. "Startup Acquisitions: Acquihires and Talent Hoarding," Diskussionsschriften dp2309, Universitaet Bern, Departement Volkswirtschaft.
    3. Martin Peitz, 2023. "Governance and Regulation of Platforms," CRC TR 224 Discussion Paper Series crctr224_2023_480, University of Bonn and University of Mannheim, Germany.
    4. Wang, Jiancheng & Li, Xiaoye, 2023. "From “Super App” to “Super VC”: The value-added effect of China's digital platforms," Finance Research Letters, Elsevier, vol. 54(C).
    5. Jean-Michel Benkert & Igor Letina & Shuo Liu, 2023. "Startup Acquisitions: Acquihires and Talent Hoarding," Papers 2308.10046, arXiv.org, revised Jul 2024.
    6. Prado, Tiago S., 2022. "Safeguarding Competition in Digital Markets: A Comparative Analysis of Emerging Policy and Regulatory Regimes," 31st European Regional ITS Conference, Gothenburg 2022: Reining in Digital Platforms? Challenging monopolies, promoting competition and developing regulatory regimes 265666, International Telecommunications Society (ITS).
    7. Laureen de Barsy & Axel Gautier, 2024. "Big Tech Acquisitions and Innovation: An Empirical Assessment," CESifo Working Paper Series 11025, CESifo.

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    More about this item

    Keywords

    Digital platform; Big Tech; Venture capital; Start-up; Innovation funding; Kill zones;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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