It’s a free market, so why prevent tech whales from swallowing innovative minnows?
One of the arguments behind the increasing demands for regulation of the major tech companies is the need to control their acquisitions, which are rightly seen as threats to innovation due to these behemoths’ ability to simply buy or copy any idea they find interesting.
On the one hand, the regulators are now scrutinizing these companies’ buyouts to assess their legitimacy, or if they are merely efforts to destroy or neutralize potential competitors. At the same time, some countries are taking a more protectionist approach, seeking to control or prevent domestic players from being bought out by foreign companies. France and Britain have recently passed legislation to protect local industries, especially when a potential threat to national security is perceived, including measures to stymie possible takeovers, such as SoftBank’s purchase of ARM in 2016 or Google’s acquisition of DeepMind in 2014.
But such policies can be a double-edged sword: innovation often happens in companies that depend on buyouts to bear fruit. DeepMind, an artificial intelligence company founded by Demis Hassabis in 2010, is a good example: according to one of its first investors, the project would not have been viable if it had not been for Google’s acquisition.
Similarly, in many cases, acquisition by a big tech player is the prize pursued by many entrepreneurs as a reward for their innovation or having created a fast-growing company. It’s a fine line between encouraging this type of behavior, with the results we’ve seen in recent years, and preventing it, which could condemn many smaller players that have contributed greatly to innovation.
Is there a middle ground: regulatory oversight of acquisitions by powerful companies seems reasonable enough, but needs to be balanced by the fact that being bought out is an incentive for small businesses to innovate. In the technology world — where ideas flow quickly and a well-made acquisition can mean, in many cases, significant savings in the availability of a service that would have been significantly delayed if it had been developed from scratch — we are talking about curbs that can strongly condition the viability of many projects.
In short, a middle way can surely be found that encourages smaller companies to innovate but at the same time protects them from rapacious predators with no interest other than their own growth, even if that’s at the expense both of the market and the interests of consumers.
(En español, aquí)