Antitrust and Technological Innovation

By Hart, David M. | Issues in Science and Technology, Winter 1998 | Go to article overview

Antitrust and Technological Innovation


Hart, David M., Issues in Science and Technology


We need to broaden our understanding of government policies that have an effect on research and innovation.

The courtroom drama of U.S. v. Microsoft, now playing in Washington, D.C., has drawn hyperbolic press notices. Some observers portray the trial as the first test in the dawning Information Age of antitrust law made in the now-past industrial age. Microsoft CEO Bill Gates plays John D. Rockefeller in this construction, and Assistant Attorney General Joel Klein reprises the role of a Progressive-era trustbuster. The analogy is not entirely fanciful; Microsoft is indeed an important case. Its novelty, however, is overstated. The objective of using antitrust law to create "a democratic high-technology system" (as David Cushman Coyle put it in 1938) is deeply rooted in the U.S. political and legal tradition. Antitrust enforcement has been a hidden dimension of science and technology (S&T) policy over the past century, and it deserves to be brought squarely into the view of the S&T policy community today.

The impact of antitrust law on research and innovation is indirect. The law shapes industrial competition and the terms of cooperation among firms; these in turn influence firms' incentives to undertake R&D, to strive for productivity growth, and to bring new products to market. "Indirect," though, does not mean "unimportant." In some sectors, antitrust policy has been far more consequential for research and innovation than the federal R&D spending policies that have attracted far more attention from analysts and policymakers. As the funding and performance of scientific and technological activity increasingly shift into the private sector in the coming decades, the relative importance of antitrust policy will continue to grow.

Antitrust law is not the only dimension of S&T policy that has been obscured by the conventional wisdom in our field. Tax policy, trade policy, labor law, and regulation are also important but largely overlooked influences on the scale and scope of research and innovation in the private sector. None of these areas have been wholly neglected, yet none have received the effort they deserve. More important, we lack the conceptual framework to consider these instruments of public action in conjunction with one another and in conjunction with public R&D funding, which is the way that they appear to the firms and people whose behavior they influence. Our conceptual disarray mirrors the fragmented nature of the policy process. At best, the various policies that influence research and innovation are uncoordinated; at worst, they are contradictory.

The difficulty of integrating antitrust enforcement into S&T policy is particularly acute. The effective use of antitrust law to enhance scientific and technological progress requires careful case-by-case analysis and delicate implementation. There are no simple rules to be applied. Prosecutors, judges, and juries, who are not typically seen as central to the S&T policy process nor are they experts in it, make many of the critical decisions. By law and custom, their work cannot be brought fully into the purview of the legislative and executive branches, nor, judging from common sense and experience, should it be. A degree of decentralization and nonexpert administration in this realm provide a check on the political authorities; moreover, the system has worked reasonably well in the past. But it can be improved. Cautious efforts to train analytical attention on the interaction of antitrust and innovation and to enhance the linkages among analysts, enforcement authorities, and elected officials are warranted.

The "postwar consensus"

According to the conventional wisdom, S&T policy after World War II reflected a consensus about the appropriate role of the federal government. In this rendition of history, the "postwar consensus," first articulated by Vannevar Bush, legitimated financial support for academic research and the pursuit of R&D-intensive government missions, such as national defense and space exploration. …

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