Big Tech Platform Acquisitions of Start-ups and Venture Capital Funding for Innovation

63 Pages Posted: 22 Mar 2021 Last revised: 17 May 2022

See all articles by Tiago S. Prado

Tiago S. Prado

Quello Center at Michigan State University

Johannes M. Bauer

Michigan State University-Department of Media and Information

Date Written: March 25, 2022

Abstract

This paper investigates the effects of “big tech” platform acquisitions on venture capital (VC) funding for start-ups. We analyze observations of more than 32,000 venture capital deals in 173 different segments of the technology industry and 392 tech start-up acquisitions made worldwide between 2010 and 2020 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.

Keywords: digital platform, big tech, venture capital, start-up, innovation funding, kill zones

JEL Classification: G11, G24, G32, G34, L41, L44

Suggested Citation

Prado, Tiago S. and Bauer, Johannes M., Big Tech Platform Acquisitions of Start-ups and Venture Capital Funding for Innovation (March 25, 2022). Prado, T. S., & Bauer, J. M. (2022). Big Tech Platform Acquisitions of Start-ups and Venture Capital Funding for Innovation. Information Economics and Policy, 100973. https://doi.org/10.1016/j.infoecopol.2022.100973, Available at SSRN: https://ssrn.com/abstract=3787127 or http://dx.doi.org/10.2139/ssrn.3787127

Tiago S. Prado (Contact Author)

Quello Center at Michigan State University ( email )

406 Communication Arts Building
404 Wilson Road
East Lansing, MI 48824-1212
United States

HOME PAGE: http://https://quello.msu.edu/tiago-s-prado/

Johannes M. Bauer

Michigan State University-Department of Media and Information ( email )

409 Communication Arts Building
East Lansing, MI 48824-1212
United States
517-355-8372 (Phone)
517-355-1292 (Fax)

HOME PAGE: http://www.msu.edu/~bauerj

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