IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/110718.html
   My bibliography  Save this paper

Gathering round Big Tech: how the market for acquisitions reinforces regional inequalities in the US

Author

Listed:
  • Feldman, Maryann
  • Guy, Frederick
  • Iammarino, Simona
  • Ioramashvili, Carolin

Abstract

Are the agglomeration economies of technology hubs augmented by a localized market for start-ups – acquisitions, and IPOs? How does this affect the ability of places outside of those hubs to foster digital startups as a tool of local economic development? We study this with a particular focus on acquisitions by the seven largest American digital platforms – Amazon, Alphabet [Google], Apple, Microsoft, Facebook, Oracle and Adobe, which we call, collectively, Big Tech. We cover the years 2001-2020. We show that firms acquired by Big Tech are, disproportionately to the sectors in which they operate, concentrated in major tech clusters, and particularly in the Silicon Valley (San Francisco/San Jose). Foreign acquisitions by Big Tech also show a marked concentration in a few countries, and particular places in those countries. NASDAQ IPOs of firms in relevant sectors are similarly concentrated. Acquisition, or the less common alternative, IPO, is the second major phase of financing for a digital start up. The first phase is commonly associated with venture capital (VC), and location proximate to venture capital companies has often been seen as a motivation for locating in a tech cluster. We find, however, that neither VC funding, nor funding an investor located in the Silicon Valley, predicts either acquisition by Big Tech, or IPO. Funding by any of the VCs that helped launch the Big Tech firms, however, is strongly associated with Big Tech acquisition. This suggests an important role for social networks in both the first and second phases of financing, but not necessarily a geographical role in the first phase. We argue that the acquisition market – and its effects on both the major tech hubs and the left behind rest – depends crucially on the proprietary control of access to various digital network products. Regulation of these markets, particularly in the form of common carrier status and open standards, could achieve a considerable re-balancing.

Suggested Citation

  • Feldman, Maryann & Guy, Frederick & Iammarino, Simona & Ioramashvili, Carolin, 2021. "Gathering round Big Tech: how the market for acquisitions reinforces regional inequalities in the US," LSE Research Online Documents on Economics 110718, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:110718
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/110718/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ducci,Francesco, 2020. "Natural Monopolies in Digital Platform Markets," Cambridge Books, Cambridge University Press, number 9781108491143, November.
    2. Ali Jose Lopez Giron & Pierre Vialle, 2017. "A preliminary analysis of mergers and acquisitions by Microsoft from 1992 to 2016 : a resource and competence perspective," Post-Print hal-02374209, HAL.
    3. Max Nathan, 2015. "Same difference? Minority ethnic inventors, diversity and innovation in the UK," Journal of Economic Geography, Oxford University Press, vol. 15(1), pages 129-168.
    4. Dani Rodrik, 2018. "What Do Trade Agreements Really Do?," Journal of Economic Perspectives, American Economic Association, vol. 32(2), pages 73-90, Spring.
    5. Maryann Feldman & Frederick Guy & Simona Iammarino, 2021. "Regional income disparities, monopoly and finance," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 14(1), pages 25-49.
    6. Simona Iammarino & Andrés Rodriguez-Pose & Michael Storper, 2019. "Regional inequality in Europe: evidence, theory and policy implications," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 273-298.
    7. William Lazonick, 2009. "Sustainable Prosperity in the New Economy? Business Organization and High-Tech Employment in the United States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number spne.
    8. Lopez Giron, Ali Jose & Vialle, Pierre, 2017. "A preliminary analysis of mergers and acquisitions by Microsoft from 1992 to 2016: A resource and competence perspective," 28th European Regional ITS Conference, Passau 2017 169462, International Telecommunications Society (ITS).
    9. Feldman, Maryann & Lowe, Nichola, 2015. "Triangulating regional economies: Realizing the promise of digital data," Research Policy, Elsevier, vol. 44(9), pages 1785-1793.
    10. Eggertsson, Gauti B. & Robbins, Jacob A. & Wold, Ella Getz, 2021. "Kaldor and Piketty’s facts: The rise of monopoly power in the United States," Journal of Monetary Economics, Elsevier, vol. 124(S), pages 19-38.
    11. Martin Kenney, 2011. "How venture capital became a component of the US National System of Innovation," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(6), pages 1677-1723, December.
    12. Michael S. Dahl & Olav Sorenson, 2012. "Home Sweet Home: Entrepreneurs' Location Choices and the Performance of Their Ventures," Management Science, INFORMS, vol. 58(6), pages 1059-1071, June.
    13. Ann Markusen, 1996. "Sticky Places in Slippery Space: A Typology of Industrial Districts," Economic Geography, Taylor & Francis Journals, vol. 72(3), pages 293-313, July.
    14. Arora, Ashish & Gambardella, Alfonso (ed.), 2005. "From Underdogs to Tigers: The Rise and Growth of the Software Industry in Brazil, China, India, Ireland, and Israel," OUP Catalogue, Oxford University Press, number 9780199275601.
    15. Wen Wen & Feng Zhu, 2019. "Threat of platform‐owner entry and complementor responses: Evidence from the mobile app market," Strategic Management Journal, Wiley Blackwell, vol. 40(9), pages 1336-1367, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carolin Ioramashvili & Maryann Feldman & Frederick Guy & Simona Iammarino, 2024. "Gathering round Big Tech: How the market for acquisitions concentrates the digital sector," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 17(2), pages 293-306.
    2. Maryann Feldman & Frederick Guy & Simona Iammarino, 2021. "Regional income disparities, monopoly and finance," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 14(1), pages 25-49.
    3. N. Cortinovis & D. Zhang & R. Boschma, 2024. "Regional diversification and intra-regional wage inequality in the Netherlands," Regional Studies, Taylor & Francis Journals, vol. 58(12), pages 2292-2306, December.
    4. Frederick Guy, 2020. "Who wants their city to become a world city? Comment on “Expanding the international trade and investment policy agenda: The role of cities and services”," Journal of International Business Policy, Palgrave Macmillan, vol. 3(3), pages 224-228, September.
    5. Simona Iammarino, 2018. "FDI and regional development policy," Journal of International Business Policy, Palgrave Macmillan, vol. 1(3), pages 157-183, December.
    6. Haifeng Qian, 2018. "Knowledge-Based Regional Economic Development: A Synthetic Review of Knowledge Spillovers, Entrepreneurship, and Entrepreneurial Ecosystems," Economic Development Quarterly, , vol. 32(2), pages 163-176, May.
    7. William R. Kerr & Frederic Robert-Nicoud, 2020. "Tech Clusters," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 50-76, Summer.
    8. Andrés Rodríguez-Pose & Javier Terrero-Dávila & Neil Lee, 2023. "Left-behind versus unequal places: interpersonal inequality, economic decline and the rise of populism in the USA and Europe," Journal of Economic Geography, Oxford University Press, vol. 23(5), pages 951-977.
    9. Paige Clayton & Maryann Feldman & Benjamin Montmartin, 2019. "Funding Emerging Ecosystems," GREDEG Working Papers 2019-25, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    10. Alvaro von Borries & Markus Grillitsch & Karl-Johan Lundquist, 2024. "Structural transformation, the knowledge economy, and the geography of low-income work," Journal of Economic Geography, Oxford University Press, vol. 24(2), pages 285-308.
    11. Katherine Parsons & Rick Delbridge & Elvira Uyarra & David Waite & Robert Huggins & Kevin Morgan, 2024. "Advancing inclusive innovation policy in the UK’s second-tier city-regions," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 44(3), pages 313-336, September.
    12. Kesidou, Effie & Romijn, Henny, 2008. "Do Local Knowledge Spillovers Matter for Development? An Empirical Study of Uruguay's Software Cluster," World Development, Elsevier, vol. 36(10), pages 2004-2028, October.
    13. Max-Peter Menzel & Maryann P. Feldman & Tom Broekel, 2017. "Institutional change and network evolution: explorative and exploitative tie formations of co-inventors during the dot-com bubble in the Research Triangle region," Regional Studies, Taylor & Francis Journals, vol. 51(8), pages 1179-1191, August.
    14. Paige Clayton, 2024. "Different outcomes for different founders? Local organizational sponsorship and entrepreneurial finance," Small Business Economics, Springer, vol. 62(1), pages 23-62, January.
    15. Mary Donegan, 2019. "Bridging commercialisation and redevelopment: Jurisdictions and university policy development," Urban Studies, Urban Studies Journal Limited, vol. 56(9), pages 1768-1785, July.
    16. Nils Grashof & Stefano Basilico, 2023. "The dark side of green innovation? Green transition and regional inequality in Europe," Papers in Evolutionary Economic Geography (PEEG) 2314, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Jun 2023.
    17. F.C. Stam & Ben Spigel, 2016. "Entrepreneurial Ecosystems," Working Papers 16-13, Utrecht School of Economics.
    18. Frederick Guy, 0. "Who wants their city to become a world city? Comment on “Expanding the international trade and investment policy agenda: The role of cities and services”," Journal of International Business Policy, Palgrave Macmillan, vol. 0, pages 1-5.
    19. Masoumeh Ghorbani & Thomas Brenner, 2021. "Prerequisites and initial developments for economic specialization in lagging regions—A study of specialized villages in Iran," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 41(2), pages 229-268, October.
    20. Rothstein, Sidney A., 2020. "Toward a discursive approach to growth models: Social blocs in the politics of digital transformation," MPIfG Discussion Paper 20/8, Max Planck Institute for the Study of Societies.

    More about this item

    Keywords

    tech giats; market power; start-ups; acquisitions; regional inequality;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:110718. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.