The Impact of Digital Platform Mergers and Acquisitions on Corporate Innovation

Gusang Kang ()
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Gusang Kang: KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP), Postal: [30147] Building C, Sejong National Research Complex, 370, Sicheong-daero, Sejong-si, Korea, https://www.kiep.go.kr/eng/

No 24-25, World Economy Brief from Korea Institute for International Economic Policy

Abstract: This study examines how 'killer acquisitions' in the digital platform market have impacted innovation performance post-merger. This analysis focuses particularly on M&As among various types of corporate consolidations by digital platforms. It estimates factors influencing the probability of M&A by digital platforms and uses the technological similarity index between the acquiring digital platform and the acquired company as a key explanatory variable. Then, using the technological similarity index, the analysis categorizes the M&A cases involving digital platforms into 'killer acquisitions' and 'non-killer acquisitions' and compares innovation performance by type of acquisition. The analysis focused on identifying "killer acquisitions" by examining the technology similarity index between firms before and after M&As conducted by GAFAM. Killer acquisitions were defined as those with minimal change in the technology similarity index pre- and post-transaction. The study found that killer acquisitions negatively impact innovation, as measured by a significant decline in the number of patent applications from acquired companies, compared to non-killer acquisitions where patent applications tended to increase post-acquisition. These findings highlight the need for methodologies, such as the technological similarity index, to better identify and regulate such anti-competitive acquisitions in the digital platform sector.

Keywords: Corporate Innovation; killer acquisitions; non-killer acquisitions; M&A (search for similar items in EconPapers)
Pages: 6 pages
Date: 2024-08-10
New Economics Papers: this item is included in nep-com, nep-cse, nep-pay, nep-reg and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepwe:2024_025

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