Information and technology markets often feature high market concentration and frequent acquisitions. Understanding the motives underlying these acquisition strategies is therefore a first-order question for policy makers and practitioners. Using a dynamic model, I analyze acquisition records of the "big five" (or "tech giants") -- Google, Amazon, Microsoft, Meta, and Apple. I characterize the firms' acquisition decisions observed in the data as a Markov perfect equilibrium that is driven by their scale economies and competitive motive. I find that the motive to keep up with their rivals can explain a major share of their acquisition behaviors, sometimes overshadowing their internal motives of scale economies. I show that a company might opt to acquire not necessarily because it can benefit from technological synergies generated from accumulating similar targets, but to align with the trajectories of their rivals to mitigate the risk of falling behind.
Sectors in which the tech giants made acquisitions A growing overlap in the acquisition sectors of the big tech companies
Colored in red are the top 20 sectors that have been popular among the tech giants for acquisitions from 1987 to 2021. [ make plot bigger ]
Insructor on Record:
Teaching Assistant / Grading Assistant: