Innovation matters : competition policy for the high-technology economy

"Antitrust enforcement has long been focused on price competition-approving or denying mergers based on whether or not it would create or reduce opportunities for consumers to be able to "shop around" for the lowest prices when it comes to internet access, cable subscriptions, airfare, and so on. It is relatively easy to evaluate price impacts-these are qualitative measures and economic theory presents many tools to be able to do so. However, the impact of antitrust policy on innovation is much less well known, and harder to study. Was Microsoft abusing a monopoly by bundling a web browser with its operating system? Would a merger of Genzyme and Novazyme, the only companies with active research and development programs for Pompe Disease promote or delay a cure for this fatal genetic disorder? Is Google's search engine good for consumers or not? This book collects the current state of knowledge about the relationships between market structure, firm behavior, and the production of new products and services, all to provide a clear picture of the challenges of making and enforcing antitrust policy in the digital era. Gilbert addresses the ways in which legal precedents established in the twentieth century no longer hold up in the twenty-first, complicates existing theories by Schumpeter and Arrow about competition, and attempts to make meaning out of the conflicting empirical literature surrounding mergers. Gilbert does not shy away from making recommendations. A few examples: In cases where one firm acquires a competitor, he calls for antitrust enforcement officials and courts to pay more attention to whether acquired firms are successful innovators. In some cases, an incumbent acquiring a new entrant does stymy innovation as there are then fewer firms operating in the same space, but in other cases, people launch start-ups with the hopes of getting bought out by a competitor, and so prohibiting acquisition of a competing firm could limit the number of innovative new companies that are launched. He also discusses the role of interoperability standards in promoting innovation on the one hand, through the economies of scale allowable by knowing that components developed can be used across a number of devices, but also its role in limiting innovation when dominant firms coalesce around a standard that is unreachable by competitors."