A Taxonomy of Dynamic Competition Theories

Public policies and changing boundaries of firms in a “history-friendly” model of the co-evolution of the computer and semiconductor industries

“…Audretsch et al (2001) and Ellig and Lin (2001) provide a thorough verbal discussion of the main issues involved in competition policies in dynamic markets, and notably, these issues have been recently at the centre of the Microsoft case and of the ensuing debate (Gilbert and Katz 2001). The main issues raised in these strands of the discussion have focused on the desirability of antitrust sanction of monopolistic positions in industries characterized by network externalities and increasing returns to adoption as well as on the appropriate methods for preventing further exploitation of anti-competitive behaviour.…”

The Paradox of the Exclusion of Exploitative Abuse

“…3 More recently, the focus of competition policy on price has been criticized as being shortsighted. The Schumpeterian perspective, named after early 20th century economist Joseph Schumpeter, is that the important dimension of competition is not in the market at any one time, but in providing innovations that replace products (Ellig and Lin, 2001;Katz and Shelanski, 2005). Monopoly profits are the incentive and reward for this innovation.…”

Role of competition policy in the US innovation system

“…If these procedures continue to be applicable, then what theoretical approaches will help guide the antitrust enforcement agencies and the judiciary when addressing technological and market innovation in making their decisions to enforce the competition policies of the USA? Ellig and Lin (2001) identify five theoretical perspectives underlying dynamic competition, including Schumpeterian, evolutionary, Austrian, pathdependence, and resource-based, all with specific policy implications for antitrust enforcement. However, it should be noted that not all these perspectives reach the same conclusions regarding economic efficiency, and thus, economic welfare; but they all share a focus on a broad interpretation of innovation as a key component of the competitive process.…”

“…From this perspective, antitrust policy enforcers need to recognize that: while short-run inefficiencies (such as market power, monopoly, fluctuations) may arise, it is longrun efficiency that is the goal; supra-normal profits are an incentive to firms and entrepreneurs to implement and seek innovations; and market power provides resources to finance and implement new innovations (Ellig and Lin, 2001).…”

“…Policy interventions should focus on improving the ability of the competitive process to produce and encourage discovery, innovation, adaptation, and feedback in the market, rather than penalizing seemingly anti-competitive market structures (Ellig and Lin, 2001).…”