The canary in the cage: How do platform investors in China influence investee firms?

Platform investors have become increasingly important in shaping the business landscape in the digital era. How do platform investors in China influence investee firms? Based on resource dependence theory, we argue that investee firms can obtain complementary resources from platform ecosystems. At the same time, platform investors gain power over the resource allocation of investee firms. We test our theory using a sample of 2692 investors operating in China and their 7237 investments worldwide. We find that firms backed by platform investors obtain subsequent financing more quickly. Investor status positively moderates this relationship. However, platform investors negatively influence the innovation performance of investee firms. Data transfer from investee firms to investors amplifies the negative influence of platform investors on investee firms' innovation. Stronger intellectual property protection regimes attenuate the negative influence. We contribute to the platform investor literature by integrating resource dependence theory and platform ecosystem theory, identifying data transfer and intellectual property protection as key boundary conditions that moderate the influence of platform investors, and providing empirical evidence on the global influence of platform investors operating in China. This study helps practitioners and policymakers understand the influence of platform investors.