Beyond Schumpeter vs. Arrow: How Antitrust Fosters Innovation

Baker, Jonathan

doi:10.2139/ssrn.1103623

Cited by 31 publications

(11 citation statements)

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“…So, in these cases, the authorities' concerns are frequently not related to specific pipeline projects and the effect of post-merger reduced incentives on them, but rather on the removal of a player which has a strategy and ability of bringing incremental innovations to the market. As we are assuming as to the market with competing innovation efforts matches the winner-take-all/winner-take-most case in Baker (2007). Finally, the innovation competition through future innovation efforts is very similar to the overlaps in capabilities category in Federico, Scott Morton, & Shapiro (2020).…”

Section: Innovation Competition Through Incremental Innovation Efforts In the Product Marketmentioning

confidence: 95%

“…There are different situations in which innovation competition is at stake and, therefore, need different merger enforcement. Baker (2007) list types of markets which demand enforcement to protect innovation. 33 Katz & Shelanski ( 2007) make an effort in proposing canonical situations representing the idea that depending on how close innovation is to market launch, there will be differences in the enforcement itself.…”

Section: The Different Faces Of Innovation Competition and The Theories Of Harm To Innovationmentioning

confidence: 99%

“…33 Which are (i) winner-take-all or winner-take-most markets, (ii) industries where technological or regulatory developments determine future competition, (iii) rapidly growing industries. For more details, see Baker (2007). 34 The typology for the three faces of innovation competition follows Federico, Scott Morton, & Shapiro (2020) and Katz & Shelanski (2007) to some extent, but with important differences.…”

Section: The Different Faces Of Innovation Competition and The Theories Of Harm To Innovationmentioning

confidence: 99%

“…Innovation effects occur through the lessening of innovation incentives and reduction of parallel research efforts. 7 The understanding how mergers change the incentives to innovate is the main call on the literaturerepresented by the contributions of the contestability, appropriability, and synergies principles in Shapiro (2012), the typologies of cases where these effects are applied in Baker (2007), and the internalization of a "business-stealing effect", in Federico, Scott Morton & Shapiro (2020). It is important to notice that firms which compete through innovation often compete simultaneously on other variables as well, such as prices and quantity.…”

Section: Introductionmentioning

confidence: 99%

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Innovation competition in horizontal mergers: choosing the framework for Competition Policy assessment

Lyra¹,

Pires-Alves²

2021

Blucher Engineering Proceedings

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This article discusses the assessment of horizontal mergers and harm to innovation when there is innovation competition. The goal is to build a scheme for the proper choice of the framework of analysis, presenting, for each situation: mechanisms to identify innovation competition, to undertake market definition, to assess the competitive significance of firms, identification of the appropriate theories of harm and evidence. We review the literature on Competition Policy and on Economics of Innovation and take examples from the US and European case law. We also briefly discuss the strategic management literature to provide insights for the assessment. Considering post-merger reductions on innovation incentives as harm to innovation, we find differences of traditional merger procedure adequacy and challenges to build evidence, considering three faces of innovation, including possible combinations of these faces within a same merger case: (i) incremental innovation efforts in the product market, (ii) ongoing efforts for developing new products and (iii) future innovation efforts. When the traditional merger procedure is inadequate, we argue in favor of using a capabilities-based assessment, changing the step-by-step procedure.

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Section: Innovation Competition Through Incremental Innovation Efforts In the Product Marketmentioning

confidence: 95%

Section: The Different Faces Of Innovation Competition and The Theories Of Harm To Innovationmentioning

confidence: 99%

Section: The Different Faces Of Innovation Competition and The Theories Of Harm To Innovationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Innovation competition in horizontal mergers: choosing the framework for Competition Policy assessment

Lyra¹,

Pires-Alves²

2021

Blucher Engineering Proceedings

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“…There is an ongoing debate with different approaches on how to incorporate innovation in merger review. Some authors prefer to follow the conventional step-bystep merger analysis with changes in the steps themselves such as Shapiro (2011), Baker (2007), Katz and Shelanski (2007), while some others prefer a more radical departure from conventional merger analysis, like Sidak and Teece (2009), Jorde and Teece (1990a), Kerber (2011), Budzinski (2008) and Farrel (2006). According to this literature, it is possible to verify that one important challenge is due to the perspective opened in the competition by a successful innovation and its potential to create new markets.…”

Section: Price Bias and Static Analysismentioning

confidence: 99%

STARTUPS AND YOUNG INNOVATIVE FIRMS MERGERS & ACQUISITIONS: AN ANTITRUST DEBATE? LESSONS FROM THE ICT TECNO-ECONOMIC PARADIGM

Pires-Alves

Gonzalo

Lyra

2019

Rev. econ. contemp.

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This paper is devoted to answering two questions. First, as to how the antitrust authorities should consider knowledge-based startups or the acquisition of young innovative firms. Second, what the current institutional challenges in this topic are. We looked at the antitrust theoretical debate and examined two recent merger cases of the ICT industry in the United States and in the European Union in order to extract insights about these questions. In addition, we briefly explored the Brazilian institutional framework to propose an agenda in terms of policies and academic research for this country. We sustain that market shares are not an accurate proxy for market power considering the possibility of being successful in terms of innovation strategies; they can be highly volatile or might not appropriately show the firm's potential in the process of

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Innovation and profitability following antitrust intervention against a dominant platform: The wild, wild west?

Thatchenkery

Katila

2022

Strategic Management Journal

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Research Summary This study examines whether “unblocking” competition through antitrust intervention against a dominant platform can spur complementor innovation in platform ecosystems. Using a novel dataset on enterprise infrastructure software and a difference‐in‐differences design, we examine the relation between the U.S. antitrust intervention against Microsoft (dominant enterprise platform) and subsequent innovation and profitability of infrastructure applications firms (complementors). The data show that innovation among complementors—particularly ones with low market share—soared when the competitive pressure on the dominant platform amplified. However, the profitability of these complementors dropped. Our results contribute to understanding links between competition and innovation in platform ecosystems, as well as the opportunities and threats related to dominant platforms in those ecosystems. Managerial Summary Complementors (apps, services) that are owned by their platforms often have an unfair advantage. Antitrust action challenges the power of such dual platform‐complementors, reasoning that unfair advantage blocks fair competition, and, in turn, reduces firms' incentives to innovate and thus limits consumer choice. We examine whether reducing anticompetitive barriers and platform‐complementors' power revitalizes the platform ecosystem. Using a landmark antitrust case, we find mixed results: while complementors do innovate more, their profits go down. In particular, the low‐share complementors that bring in the most innovation are also the ones that lose the most financially, suggesting that they may have over‐relied on the platform for key assets. To develop a healthy ecosystem in the long run, platform owners may want to resist the temptation to keep complementors weak and instead help support their development to stand on their own.

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Beyond Schumpeter vs. Arrow: How Antitrust Fosters Innovation

Cited by 31 publications

References 1 publication

Innovation competition in horizontal mergers: choosing the framework for Competition Policy assessment

Innovation competition in horizontal mergers: choosing the framework for Competition Policy assessment

STARTUPS AND YOUNG INNOVATIVE FIRMS MERGERS & ACQUISITIONS: AN ANTITRUST DEBATE? LESSONS FROM THE ICT TECNO-ECONOMIC PARADIGM

Innovation and profitability following antitrust intervention against a dominant platform: The wild, wild west?

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