Friday, January 20, 2023

Big Tech and Strategic Management: How Management Scholars Can Inform Competition Policy

Contemporary competition policy is informed in significant measure by static microeconomic theories that are of limited use when competition is driven by innovation, which brings rapid change, even for large, platform-based companies (“Big Tech”). Static models in competition economics prioritize efficiency gains from cost savings even though the welfare gains from innovation are much larger. Competition economics could benefit from the integration of strategic management and innovation economics. Management scholars have the opportunity to properly introduce and apply concepts like isolating mechanisms, capabilities (and their development), and ecosystem competition into the policy debate. If management scholars invest the time and effort to understand current competition policy models, they may be able to reengineer them in a manner that leads to a better understanding of dynamic competition, a more nuanced view of the nature of economic rents, and better metrics for assessing competitive effects. These should in turn lead to better public policy.

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