Building Platforms Through Acquisitions

The rise of the platform economy and digitalization has completely changed the dynamics of how firms grow in the market. Platform firms, such as Google, Amazon, and Facebook, tap to the growth through network effects leading to winner-takes-all dynamics with few firms dominating the market. In a highly dynamic and turbulent market, acquisitions are a strategic tool for firms to respond to market changes. In this study, we set out to study platform strategies by analyzing 641 acquisitions of leading six platform firms between 2000 and 2020. We utilized a supervised machine learning approach to classify firms’ acquisitions into layers of a digital stack and then analyzed the results against the firms’ 26 platforms positioned in the same stack. Our results confirm coring strategy with platform firms increasingly acquiring assets in the same layer and the layer below of their platforms. Strongest temporal finding is that the middleware layer has become strategically important for platform firms during the last 10 years. Overall, our study highlights the promise and importance of stack-based layered analysis for understanding digital businesses.