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.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.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.doi http://dx.doi.org/10.1007/s40812-022-00223-3
• dc.identifier.issn 0391-2078
• dc.identifier.uri http://hdl.handle.net/10230/57576
• dc.language.iso eng
• dc.publisher Springer
• dc.relation.ispartof Journal of Industrial and Business Economics. 2022;49(3):509-43.
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/788547
• dc.relation.projectID info:eu-repo/grantAgreement/ES/2PE/CEX2019-000915-S
• 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.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by/4.0/
• dc.subject.keyword M&A
• dc.subject.keyword Digital platforms
• dc.subject.keyword Platform competition
• dc.subject.keyword Consumer welfare
• dc.title M&A and early investment decisions by digital platforms
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/publishedVersion