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Are the biggest tech corporations buying up small, innovative tech companies in a heavy-handed play to clear the field of potential competitors? This question has reverberated through the halls of Congress and at federal regulatory agencies in the United States, as well as in the European Union and other countries around the world.

Professor of Economics Liad Wagman at Illinois Institute of Technology’s Stuart School of Business has been conducting groundbreaking research—three studies, two years in the making—examining the effects of merger and acquisition (M&A) activity by the largest tech companies. According to Wagman, the evidence tells a story with a lot more characters and a lot more competition than headlines about anticompetitive big tech suggest.

During his recent two-year appointment as senior economic and technology adviser at the U.S. Federal Trade Commission’s Office of Policy Planning, Wagman led an FTC study of M&A activity by the group of large tech platforms referred to as GAFAM—Alphabet/Google, Apple, Facebook/Meta, Amazon, and Microsoft. The study provided policymakers with data about more than 1,000 acquisitions by the five GAFAM firms from 2010 through the end of 2019. 

The release of a report on the in September 2021 triggered a spate of news articles and statements from legislators and regulators about potential anticompetitive behavior by GAFAM. However, the report reveals only part of the story, Wagman says, because it did not compare GAFAM’s M&A activity with that of other companies or provide an analysis of their comparative effects. 

Independently, Wagman made those comparisons in projects he undertook with two researchers from the University of Maryland—Ginger Zhe Jin, professor of economics and former director of the FTC Bureau of Economics, and Mario Leccese. “These studies focus on the broader picture of how technology acquisitions are happening in the marketplace,” Wagman says, “comparing across all of the top acquirers in terms of pace, concentration, number of deals, competitive effects, and so on.”

Their working paper for the National Bureau of Economic Research, titled “,” compares GAFAM’s M&A activities from 2010 to 2020 with the activities of private equity firms and other major players in tech M&A, such as Samsung, AT&T, Cisco, and Intel. 

According to Wagman, the team leveraged a unique taxonomy of technology categories, developed for the finance industry and not previously used by academic researchers, as well as state-of-the-art econometrics to show that GAFAM’s acquisitions in various technology sectors are not necessarily reducing competition from other incumbents. 

“We see both competition within GAFAM and competition between GAFAM and other top acquirers increasing over time, insofar that they acquire in the same business areas,” he says. “In addition, we find positive correlation between GAFAM acquiring in a technology area and other firms also entering the area via M&A. Moreover, from 2018 on, GAFAM has been matched or outpaced [in tech acquisitions] by other leading tech acquirers and by private equity firms, on a per-firm basis.”

In another paper, “,” Wagman, Jin, and Leccese widen the lens further to include acquisitions of tech companies by all firms that are publicly listed in the North American stock exchanges. They find that in most cases businesses across all types of industries—particularly larger and older firms—acquire tech companies in order to gain access to technology that can help them improve their products, maintain or expand their business, and remain profitable.

“Our analysis shows that companies that are in more competitive settings are more likely to seek acquisitions, likely in order to differentiate their products [from their competitors’ products],” says Wagman. “This has the added benefit of bringing those innovations from smaller [tech] companies and entrepreneurs into the bigger market by commercializing them and making them more widely available.”

Wagman notes that while a core mission of the FTC is to promote competition in the marketplace, there’s a twist in this case. “The more competitive a market is, at least as we see in our data, the more likely firms are to seek to differentiate, and one way to do so is to look for technology acquisitions, which then naturally leads to concerns [about anticompetitive behavior],” he says. “It’s ironic, but it’s the cycle of competition.”

Wagman, Jin, and Leccese are continuing their work in the M&A space with research into whether acquisitions of small tech companies by large platforms affect subsequent venture investment in those areas of technology.

“We see government actions regarding big tech all over the world,” says Wagman. “These studies contribute to that conversation, primarily as far as acquisitions are concerned.”

Photo: Professor of Economics Liad Wagman