IDEAS home Printed from https://ideas.repec.org/a/eee/indorg/v99y2025ics0167718725000153.html
   My bibliography  Save this article

Start-up acquisitions, venture capital and innovation: A comparative study of Google, Apple, Facebook, Amazon and Microsoft

Author

Listed:
  • Gugler, Klaus
  • Szücs, Florian
  • Wohak, Ulrich

Abstract

We evaluate the impact of big-tech acquisitions on the incentives for venture capital (VC) investment and innovation. Using data on several hundred acquisitions by Google, Apple, Facebook, Amazon and Microsoft (GAFAM), we study the evolution of VC investment and patenting in affected technology fields relative to control groups. The results show a clear negative impact on VC investment, while the effect on innovation depends on the acquirer and period. Over time, the treatment effects on both outcomes improve, as GAFAM firms' product and tech-portfolios become more similar. Yet, around 14% of acquisitions impact both metrics negatively.

Suggested Citation

  • Gugler, Klaus & Szücs, Florian & Wohak, Ulrich, 2025. "Start-up acquisitions, venture capital and innovation: A comparative study of Google, Apple, Facebook, Amazon and Microsoft," International Journal of Industrial Organization, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:indorg:v:99:y:2025:i:c:s0167718725000153
    DOI: 10.1016/j.ijindorg.2025.103148
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167718725000153
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijindorg.2025.103148?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Clément de Chaisemartin & Xavier D'Haultfœuille, 2020. "Two-Way Fixed Effects Estimators with Heterogeneous Treatment Effects," American Economic Review, American Economic Association, vol. 110(9), pages 2964-2996, September.
    2. Affeldt, Pauline & Kesler, Reinhold, 2021. "Big Tech Acquisitions — Towards Empirical Evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 12(6), pages 471-478.
    3. Ornaghi, Carmine, 2009. "Mergers and innovation in big pharma," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 70-79, January.
    4. Nicholas Bloom & Mark Schankerman & John Van Reenen, 2013. "Identifying Technology Spillovers and Product Market Rivalry," Econometrica, Econometric Society, vol. 81(4), pages 1347-1393, July.
    5. Chiara Fumagalli & Massimo Motta & Emanuele Tarantino, 2020. "Shelving or developing? The acquisition of potential competitors under financial constraints," Economics Working Papers 1735, Department of Economics and Business, Universitat Pompeu Fabra.
    6. Haucap, Justus & Rasch, Alexander & Stiebale, Joel, 2019. "How mergers affect innovation: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 283-325.
    7. Cabral, Luís, 2021. "Merger policy in digital industries," Information Economics and Policy, Elsevier, vol. 54(C).
    8. Kevin A. Bryan & Heidi L. Williams, 2021. "Innovation: Market Failures and Public Policies," NBER Working Papers 29173, National Bureau of Economic Research, Inc.
    9. Kevin A. Bryan & Erik Hovenkamp, 2020. "Antitrust Limits on Startup Acquisitions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 56(4), pages 615-636, June.
    10. Igor Letina & Armin Schmutzler & Regina Seibel, 2024. "Killer Acquisitions And Beyond: Policy Effects On Innovation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 591-622, May.
    11. Gugler, Klaus & Szücs, Florian, 2016. "Merger externalities in oligopolistic markets," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 230-254.
    12. Gerard Hoberg & Gordon Phillips, 2016. "Text-Based Network Industries and Endogenous Product Differentiation," Journal of Political Economy, University of Chicago Press, vol. 124(5), pages 1423-1465.
    13. Jaffe, Adam B., 1989. "Characterizing the "technological position" of firms, with application to quantifying technological opportunity and research spillovers," Research Policy, Elsevier, vol. 18(2), pages 87-97, April.
    14. Giulio Federico & Fiona Scott Morton & Carl Shapiro, 2020. "Antitrust and Innovation: Welcoming and Protecting Disruption," Innovation Policy and the Economy, University of Chicago Press, vol. 20(1), pages 125-190.
    15. Marshall, Guillermo & Parra, Álvaro, 2019. "Innovation and competition: The role of the product market," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 221-247.
    16. Massimo Motta & Sandro Shelegia, 2021. "The “kill zone”: copying, acquisition and start-ups’ direction of innovation," Economics Working Papers 1780, Department of Economics and Business, Universitat Pompeu Fabra.
    17. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 701-728.
    18. Thomas G. Wollmann, 2019. "Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act," American Economic Review: Insights, American Economic Association, vol. 1(1), pages 77-94, June.
    19. Cloodt, Myriam & Hagedoorn, John & Van Kranenburg, Hans, 2006. "Mergers and acquisitions: Their effect on the innovative performance of companies in high-tech industries," Research Policy, Elsevier, vol. 35(5), pages 642-654, June.
    20. Scott Deerwester & Susan T. Dumais & George W. Furnas & Thomas K. Landauer & Richard Harshman, 1990. "Indexing by latent semantic analysis," Journal of the American Society for Information Science, Association for Information Science & Technology, vol. 41(6), pages 391-407, September.
    21. Thomas G. Wollmann, 2020. "How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare," NBER Working Papers 27274, National Bureau of Economic Research, Inc.
    22. Gautier, Axel & Lamesch, Joe, 2021. "Mergers in the digital economy," Information Economics and Policy, Elsevier, vol. 54(C).
    23. Lefouili, Yassine & Madio, Leonardo, 2023. "Market Structure and Investments : A Progress Report," TSE Working Papers 23-1491, Toulouse School of Economics (TSE), revised Sep 2024.
    24. Florian Ederer & Bruno Pellegrino, 2023. "The Great Start-up Sellout and the Rise of Oligopoly," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 274-278, May.
    25. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    26. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    27. Joel Stiebale & Florian Szücs, 2022. "Mergers and market power: evidence from rivals' responses in European markets," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 678-702, December.
    28. Jay Pil Choi & Doh-Shin Jeon, 2021. "A Leverage Theory of Tying in Two-Sided Markets with Nonnegative Price Constraints," American Economic Journal: Microeconomics, American Economic Association, vol. 13(1), pages 283-337, February.
    29. Colleen Cunningham & Florian Ederer & Song Ma, 2021. "Killer Acquisitions," Journal of Political Economy, University of Chicago Press, vol. 129(3), pages 649-702.
    30. Fumagalli, Chiara & Motta, Massimo & Tarantino, Emanuele, 2022. "Shelving or developing? Optimal policy for mergers with potential competitors," CEPR Discussion Papers 15113, C.E.P.R. Discussion Papers.
    31. Mitsuru Igami & Kosuke Uetake, 2020. "Mergers, Innovation, and Entry-Exit Dynamics: Consolidation of the Hard Disk Drive Industry, 1996–2016," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2672-2702.
    32. Jean O. Lanjouw & Mark Schankerman, 2004. "Patent Quality and Research Productivity: Measuring Innovation with Multiple Indicators," Economic Journal, Royal Economic Society, vol. 114(495), pages 441-465, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Klaus Gugler & Florian Szücs & Ulrich Wohak, 2023. "Start-up Acquisitions, Venture Capital and Innovation: A Comparative Study of Google, Apple, Facebook, Amazon and Microsoft," Department of Economics Working Papers wuwp340, Vienna University of Economics and Business, Department of Economics.
    2. Pauline Affeldt & Reinhold Kesler, 2021. "Competitors’ Reactions to Big Tech Acquisitions: Evidence from Mobile Apps," Discussion Papers of DIW Berlin 1987, DIW Berlin, German Institute for Economic Research.
    3. Lefouili, Yassine & Madio, Leonardo, 2025. "Mergers and Investments: Where Do We Stand?," TSE Working Papers 25-1617, Toulouse School of Economics (TSE).
    4. Lefouili, Yassine & Madio, Leonardo, 2023. "Market Structure and Investments : A Progress Report," TSE Working Papers 23-1491, Toulouse School of Economics (TSE), revised Sep 2024.
    5. Haucap, Justus & Stiebale, Joel, 2023. "Non-price effects of mergers and acquisitions," DICE Discussion Papers 402, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    6. Laureen de Barsy & Axel Gautier, 2024. "Big Tech Acquisitions and Innovation: An Empirical Assessment," CESifo Working Paper Series 11025, CESifo.
    7. 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).
    8. Igor Letina & Armin Schmutzler & Regina Seibel, 2024. "Killer Acquisitions And Beyond: Policy Effects On Innovation Strategies," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 591-622, May.
    9. 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).
    10. Gilbert, Richard J. & Katz, Michael L., 2022. "Dynamic merger policy and pre-merger product choice by an entrant," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    11. Esmée Dijk & José Luis Moraga-González & Evgenia Motchenkova, 2023. "Start-up Acquisitions and the Entrant’s and Incumbent’s Innovation Portfolios," Tinbergen Institute Discussion Papers 23-047/VII, Tinbergen Institute.
    12. Fons-Rosen, Christian & Roldan-Blanco, Pau & Schmitz, Tom, 2022. "The Effects of Startup Acquisitions on Innovation and Economic Growth," CEPR Discussion Papers 17752, C.E.P.R. Discussion Papers.
    13. Marc Bourreau & Axel Gautier, 2024. "Innovation and Startup Acquisition," CESifo Working Paper Series 11569, CESifo.
    14. Joel Stiebale & Florian Szücs, 2022. "Mergers and market power: evidence from rivals' responses in European markets," RAND Journal of Economics, RAND Corporation, vol. 53(4), pages 678-702, December.
    15. Gibbon, Alexandra J. & Schain, Jan Philip, 2023. "Rising markups, common ownership, and technological capacities," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    16. Motta, Massimo & Tarantino, Emanuele, 2021. "The effect of horizontal mergers, when firms compete in prices and investments," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    17. Cavenaile, Laurent & Celik, Murat Alp & Tian, Xu, 2021. "The Dynamic Effects of Antitrust Policy on Growth and Welfare," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 42-59.
    18. Christopher Teh & Dyuti Banerjee & Chengsi Wang, 2022. "Acquisition-induced kill zone," Monash Economics Working Papers 2022-24, Monash University, Department of Economics.
    19. Bennato, Anna Rita & Davies, Stephen & Mariuzzo, Franco & Ormosi, Peter, 2021. "Mergers and innovation: Evidence from the hard disk drive market," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    20. Haucap, Justus & Rasch, Alexander & Stiebale, Joel, 2019. "How mergers affect innovation: Theory and evidence," International Journal of Industrial Organization, Elsevier, vol. 63(C), pages 283-325.

    More about this item

    Keywords

    M&A; Big-tech; Innovation; Venture capital;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:99:y:2025:i:c:s0167718725000153. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505551 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.