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

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.