Google (aka Alphabet), Apple, Facebook (aka Meta), Amazon, Microsoft – or GAFAM for short: when it comes to innovation, there is currently no way around these five tech titans. Their products have radically changed our everyday lives. These companies not only rely on innovations developed in-house but also go shopping for start-ups that develop new technologies.

These buyouts have been criticized as so-called “killer acquisitions” – in other words, this means that Big Tech companies are accused of buying new, emerging companies to eliminate potential competitors. Many economists warn that this Big Tech acquisition policy leads to excessive market concentration and stifles innovation.

But is there any substance to these accusations? Florian Szücs from WU’s Department of Economics, together with his colleagues Klaus Gugler and Ulrich Wohak, investigated this question in detail. In the new episode of Meet Our Researchers, Florian Szücs explains how he and his co-researchers approached this topic. This much is for sure: The results paint a differentiated picture.

Until around 2010, start-up acquisitions by the five major tech companies had a negative impact on the number of patent applications and the availability of venture capital in the respective sectors. Since that time, however, this effect has weakened somewhat. The researchers suspect that this may be due to the fact that the Big Tech companies are now competing more strongly with each other. But even today, around 14% of GAFAM acquisitions still have a negative impact on patents and venture capital – and might therefore be considered “killer acquisitions.” And the authors say that competition authorities would be well advised to take a closer look at these 14%.

Meet Our Researchers: Florian Szücs

In our new Meet Our Researchers video, Florian Szücs goes into more detail about the methods used and the results of the research. We met Florian Szücs in his office for an interview and asked him what he finds so fascinating about these questions and what else he’s looking at in his currnent research.

Much of your research is about innovation. What do you find so interesting about this topic?

I firmly believe that innovation – especially over extended periods of time – is the decisive factor for increasing people’s prosperity. That alone makes it a key research priority for me. I also find the topic exciting when looking at it from the angle of competition. Traditionally, people fear that growing market concentration is bad for the functioning of markets and that it harms innovation. In recent years, this aspect has become more and more of an issue because large corporations have been accumulating massive market power.

How do you perceive the role of the big internet companies in our society?

The Austrian economist Alois Schumpeter once said that innovation is driven by the power of innovative destruction. In a sense, I do believe that the Big Tech companies have taken on this role of innovative destroyers – whether we like it or not. These companies have gained tremendous influence over our lives. Or rather, we have given them this kind of influence because we like to use their products, and they make our lives easier. But we may not yet have fully understood the shifts in power that this entails. These companies have incredible creative power and play a significant role in shaping the way we live. That’s why I think it’s important to keep a close eye on them. Until recently, the large US tech companies were able to operate largely without restrictions. The EU has tried to rise as a bulwark to protect the rights of consumers, and rightly so, I think. The efforts that this requires may be difficult, and the steps taken may look clumsy at times, but it’s important that someone is doing it.

What are you currently working on in your research?

I’m currently working on a project where we’re looking at how mergers in the food retail sector affect consumers’ purchasing behavior and product choices. We’re looking at how the product ranges and price structures change and how consumers react to these changes – if they buy different products or if they decide to go to a different supermarket, for example.

Also a very topical issue ...

Definitely! Especially because we’re also trying to find out how changes in purchasing costs affect prices in Austrian supermarkets, in other words, to what extent inflation is passed on to consumers. This is of course a hot topic at the moment. But it’s still too early to talk about the results in detail.

What do you want to achieve with your research?

It’s important to me that my research has at least some bearing on the real world. And as an economist, the first aspect that comes to my mind is the efficient use of resources. I often look at whether political measures achieve the desired goals or at least make their achievement more likely. I’m very interested in such policy evaluations because, on the one hand, you have to base your work on good methods and good data and, on the other hand, you can use this research to advise political decision-makers and provide them with relevant information. If, through my research, I can help to ensure that public resources, in other words taxpayer money, are used better and more efficiently, then I think that’s a valuable contribution.

How long have you been at WU?

I’ve been working here for almost 10 years now. And it still makes me happy to come to campus every day and look at the buildings. I appreciate the resources that WU makes available to us, and I’m grateful for the freedom I have in my research. In addition, our department is very much free from academic arrogance, and the hierarchies are pretty flat. I enjoy working in such an environment.