Understanding the acquisition strategies of digital platform companies
Miric M., Pagani M., El Savy O. (forthcoming 2022) “WHEN AND WHO DO PLATFORM COMPANIES ACQUIRE? UNDERSTANDING THE ROLE OF ACQUISITIONS IN THE GROWTH OF PLATFORM COMPANIES”
MISQuarterly , 46, forthcoming 2022
Milan Miric (USC University South California – Marshall Business School), Margherita Pagani (emlyon business school), Omar El Savy (USC University South California – Marshall Business School)
It is not uncommon for companies in a wide range of industries to acquire other companies in order to control assets/resources or scale-up. At first sight, this may seem like an ineffective strategy for digital platform companies that act as value-adding intermediaries between different stakeholders in their ecosystem — rather than controlling assets themselves. However, anecdotal evidence suggests that acquisitions are frequently made by platform companies — yet existing studies have not examined how acquisitions map to platform strategy. In this study, we develop a theoretical foundation for understanding how digital platform companies undertake acquisitions, and the timing of these acquisitions. Using a database of 23,517 digital platform companies and 99,527 digital non-platform companies over the period 2000-2017, we test our predictions. Our results show that strategic acquisitions are as important for digital platform companies as they are to non-platform companies, but that digital platform companies focus on making strategic acquisitions very early, and focus on first acquiring their competitors, and then later their complementors. We show that this differs from the acquisition patterns of digital, non-platform companies. We frame such acquisition strategies in a dynamic double-helix model that captures the structural evolution of platform ecosystems and patterns of value creation and control.