Merger and Acquisition Strategies of Platform vs. Non-Platform Firms

Previous literature on M&As and platform firms has not actively investigated how the acquisition strategies of platform firms differ from those of non-platform firms. We argue that there are two fundamental differences between platform and non-platform businesses: the platform businesses’ governance of ecosystems and their possession of an installed user base, which grants them the leverage to venture into new industries. These differences may drive platform firms to deploy an entirely different approach to their M&A strategies. After analyzing the acquisition strategies of platform and non-platform firms that were listed on the NASDAQ-100 Index, we found that platform firms are more likely to pursue acquisitions than non-platform firms. We further found that platform firms have a higher propensity to acquire less related targets than non-platform firms. Our findings also indicated that platform businesses with larger installed bases and longer platform business experience were more likely to acquire less related targets. This study contributes to M&A literature by examining how the logic of relatedness should be modified to explain the M&A strategies of platform firms.