Gathering round big tech: how the market for start-up acquisitions reinforces US regional inequalities

Authors: Maryann Feldman*, University of North Carolina - Chapel Hill, Simona Iammarino, London School of Economics, Frederick Guy, University of London, Carolin Ioramashvili, London School of Economics
Topics: Economic Geography, Digital Geographies
Keywords: Tech companied, monopoly, spatial distribution
Session Type: Virtual Paper
Day: 4/8/2021
Start / End Time: 1:30 PM / 2:45 PM
Room: Virtual 35
Presentation File: No File Uploaded

We investigate the geography of all acquisitions made in the U.S. by major tech firms: Alphabet, Apple, and Facebook, headquartered in Silicon Valley, and Microsoft and Amazon located in Seattle . We rely on a database drawing on S&P Capital IQ, Zephyr, Orbis, and SDC Platinum and verified with other sources to trace histories of location and financing, and assessing the motivations for the acquisition. We document the pronounced geographical concentration of the locations of acquired firms, compare it with the geographical concentrations of acquisitions in the same industries by other acquirers, and similarly with the geographical concentration of NASDAQ IPOs. We examine changes, over time, in the six giants’ shares of market capitalization; in the geographical concentration of all takeovers in the relevant industries; and in the geographical concentration of NASDAQ IPOs. This paper aims at contributing to two of the research questions : What forces contribute to rising inter-regional economic inequality? And, how do new geographical expressions of inequality challenge extant theory and policy? Our analysis suggests that the most powerful tool government has for reducing regional disparities in income could well be competition policy: if you want a world in which the owners of tech start-ups are happy to have them located in the places now left behind, you need a world in which the best prospect for a happy ending for the start-up is to grow where it gets started.

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