Project Description: Big Tech, Dynamic Competition, and Antitrust
About the Project
April 21, 2022
Innovation is recognized by policy makers as being important. It is what drives economic growth and prosperity and operates in tandem with competition. Since there is considerable recognition of these relationships, why does innovation get short shrift, not just in antitrust policy but in other areas too, e.g., environmental policy? While it is sometimes supported (via R&D subsidies) it is often unwittingly attacked, and indirectly compromised by policy makers. Nor is it always favored/advanced by executives, some of whom seem to care more about the (short term) financial performance of the business during their tenure as CEO. A short term orientation is usually inconsistent with the requirements of innovation.
There are not elegant, easy-to-model paradigms of innovation, so it gets neglected or sidelined and static modalities of analysis are brought forward instead. While the Chicago School made a huge contribution to law and economics by bringing economic analysis to antitrust policy beginning in the 70’s and 80’s, it often favored intermediate microeconomic theory that while useful in many ways, and easy to understand, suppressed innovation for analytical convenience, because of its focus on equilibrium conditions. The result was to unwittingly sideline innovation from the narratives about competition. It led to a further lack of understanding that competition is a process, not an outcome.
One cannot understand the benefits of market organization by relying purely on neoclassical frameworks. The “twin theorems” of economic welfare are not the main reason capitalism is better than socialism, or better than autocratic state ordered economies. It is the capacity of a private enterprise market system to innovate which is its distinguishing feature. Joseph Schumpeter, the American-Austrian economist recognized this long ago.
This project’s mission is to champion markets and the private enterprise system by articulating the importance of innovation to prosperity. Berkeley Policy Institute (formerly BRG Institute) sees a need to reshape the field of economics and, in particular, antitrust economics in order to reshape antitrust policy. These concerns have led some scholars to put forth an entrepreneurial theory of the firm, which now needs to inform antitrust policy. Teece’s papers "Dynamic Capabilities and Entrepreneurial Management in Large Organizations: Toward A Theory of the (Entrepreneurial) Firm” in the European Economic Review (2016), and "Towards a Capability Theory of (Innovating) Firms: Implications for Management and Policy” in the Cambridge Journal of Economics (2017), lay out foundational principles. These articles and the work of others must now be brought to the attention of the antitrust community in order for us to get a good understanding of Big Tech firms and related policy issues.
In essence, a theory of change is now needed that goes beyond the 30 years of scholarship that a handful of scholars have done on this topic. And it must be a “community” effort. We must (a) endeavor to extend and test and sharpen the framework, and (b) show how these frameworks and tools could be applied. In some cases, highlighting innovation concerns might not make a difference; but in many it will, especially when firms are innovators and pioneers. Antitrust must come to favor pioneering firms, no matter how big, so long as they remain pioneering and do not artificially suppress the innovative effort of others. We will look at the impact on issues ranging from mergers to predatory pricing to monopolization. Society will have a better and more nuanced way to understand “Big Tech” when we are done. We will also study how to better understand systemic competition from countries such as China.
The project involves numerous activities and outputs, including these components:
Presentations to academic, professional, and government bodies
Special small group presentations, such as with economists, consultants, lawyers, and technology companies
Scholarly article manuscript development (hone theories, assemble evidence)
Development of edited volumes authored by leading scholars, in areas such as Big Tech and antitrust
Special issues of journals on the project topics
Oxford-style debates
Blog and other web content
All activities aim to build a community of scholars, policymakers, and senior leaders and managers, in order to advance greater understanding and application of the project topics.
David J. Teece
Project Lead
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The Berkeley Policy Institute (formerly BRG Institute) Project on Big Tech, Dynamic Competition, and Antitrust is supported in part by a grant from the Charles Koch Foundation.