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M&A and early investment decisions by digital platforms

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dc.contributor.author Brutti, Zelda
dc.contributor.author Rojas, Luis E.
dc.date.accessioned 2023-07-14T06:48:46Z
dc.date.available 2023-07-14T06:48:46Z
dc.date.issued 2022
dc.identifier.citation Brutti Z, Rojas LE. M&A and early investment decisions by digital platforms. J Ind Bus Econ. 2022;49(3):509-43. DOI: 10.1007/s40812-022-00223-3
dc.identifier.issn 0391-2078
dc.identifier.uri http://hdl.handle.net/10230/57576
dc.description.abstract We propose an original theoretical framework that models early investment decisions of digital platform startups and use it to study how merger and acquisition policy affects consumer welfare by shaping such decisions. We formalize the investment options faced by digital platforms into a dual margin: investment in ‘customer engagement technology’, directed towards expanding the user base and in ‘intermediation technology’, directed towards lowering operational costs. Synergies through technological transfer and increased investment incentives in customer engagement explain consumer welfare improvements in the case of M&As occurring between platforms with disjoint user bases. On the other hand, lower competition erodes consumer welfare in the case of allowing M&As between platforms with overlapping user bases. We conclude that M&A policy guidance should depend on the relationship between the incumbent’s and startup’s target users and on the ability of the startup to catch up with the incumbent.
dc.description.sponsorship The authors acknowledge financial support from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centers of Excellence in R&D (CEX2019-000915-S). Rojas acknowledges financial support from the European Research Council under grant Horizon2020 GA n. 788547 (APMPAL-HET).
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Springer
dc.relation.ispartof Journal of Industrial and Business Economics. 2022;49(3):509-43.
dc.rights © The Author(s) 2022. This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/
dc.rights.uri http://creativecommons.org/licenses/by/4.0/
dc.title M&A and early investment decisions by digital platforms
dc.type info:eu-repo/semantics/article
dc.identifier.doi http://dx.doi.org/10.1007/s40812-022-00223-3
dc.subject.keyword M&A
dc.subject.keyword Digital platforms
dc.subject.keyword Platform competition
dc.subject.keyword Consumer welfare
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/788547
dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/CEX2019-000915-S
dc.rights.accessRights info:eu-repo/semantics/openAccess
dc.type.version info:eu-repo/semantics/publishedVersion


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