Abstract
Digital platform businesses have been rapidly gaining attention in management literature due to their pervasive and disruptive rise across industries and markets. Characterized by digital platforms, diversified digital businesses such as Amazon and Google have become market leaders across the globe over the past few decades. Due to fundamental differences from traditional, non-platform businesses, particularly in focus and vehicle for value creation, capture and delivery, these businesses provide a novel and important subject for management research. While extant research has examined digital platform businesses in terms of competition, complementor interactions and platform development in significant detail, research on the diversification behaviour and associated corporate strategy was found to be largely deficient. We examine diversified businesses centred around digital platforms to understand how the nature of new-age businesses impact the strategies for growth and diversification and how they differ from conventional strategies outlined in the literature. Through the panel regression analysis of leading diversified digital firms over a period of 15 years, we assess the impact of acquisition activity of the platform owner on the firm performance and innovation output corresponding to the platform. Due to the fundamental differences of digital platform businesses vis-à-vis non-platform businesses, we propose that number of acquisitions would be positively and relatedness of acquisitions negatively associated to the firm performance and innovation output for the platform. While extant research has examined the relationships for traditional businesses, our study highlights crucial differences in the relationships between acquisition activity and performance and innovation for digital platform businesses, and the findings validate all four hypothesized relationships for diversified businesses based on digital platforms. The study has important implication for both theory and practice and we aim to contribute to the literature on mergers and acquisitions, digital platforms, innovation and the theoretical bases of resource-based view, knowledge-based view and transaction cost economics. We conclude with the discussion on limitations and proposed future research directions.