The word “innovation” has become so common that we tend to forget what remarkable leaps have been made in convenience and opportunity by the technology sector. Shopping, travel and daily communications can be handled anywhere using a smartphone.
Many significant advances come to market from big companies in the tech sector. Unfortunately, since the financial crisis, there has been a prevailing thought in America that “big” is bad. This sentiment started with financial institutes, but in Washington, some are starting to question whether the theory holds for other industries as well.
Antitrust laws are essential to prevent genuine monopolistic conduct. In fact, to date, enforcement of the antitrust laws in the technology sector has simultaneously allowed businesses to innovate and grow and prevented harmful conduct. Now some are proposing upsetting this delicate balance by applying century-old laws, drafted for railroads and oil monopolies, to the technology industry in new and heavy-handed ways.
These proposals threaten innovation, the economy and the convenience and benefits we as consumers reap from these advances.
A continuous cycle of startups and acquisitions has contributed directly to both these new innovations and economic growth and new jobs. The Progressive Policy Institute reported they found a clear association between periods of heavy technology acquisition and economic growth and employment gains in the tech sector, with employment tracking acquisitions.
Utahns see the benefits of the tech jobs and economic growth more than most areas of the country. Earlier this summer, the Kauffman Index of Growth Entrepreneurship ranked Utah No. 1 small state for entrepreneurial activity. The components measures used include rate of startup growth, share of scaleups and high growth company density.
The dream of many smaller startups is to be acquired by larger firms, which have the expertise to bring the startups’ technologies to market and helping develop more complex products and services. Because investors know that acquisitions mean they will receive a return on their investment, they are more likely to invest in new startups — creating a “virtuous circle” that maximizes innovation. In addition, the tech sector’s constant innovation creates new markets, leading to more competition. For instance, Google’s purchase of data company Keyhole led to Google Earth, and its acquisition of Android led to the smartphone operating system of the same name – products that were then integrated into the Google Maps app we all rely on.
The economic impact of tech’s acquisition pattern is considerable: according to the Martin Prosperity Institute, in the last five years, Provo has topped the nation’s cities in job growth — boasting 26.8 percent increase and also ranked first in mid-wage job growth – much of which can be attributed to tech startups and investment in the area.
Implementing out of date antitrust laws on this industry could have dire consequences, which could force regulators to put a full stop on innovation by preventing these acquisitions and ignoring their positive economic and social effects. By interfering with acquisitions, antitrust regulators could harm the development of innovative new technologies and services that have the potential to tremendously benefit consumers and businesses.
This interference also risks harming the lively startup culture that has proved so critical in sparking American innovation. Utah’s startups could be starved of investment at the same time that raising money through more traditional means is more difficult because of turmoil in the IPO market. Finally, by limiting the growth of the technology sector, regulators would ultimately endanger economic growth and job creation.
For the sake of consumers, Utah jobs and our economy, we must ensure our antitrust laws continue to be enforced in ways that promote American technological innovation.
Rep. Keith Grover represents Orem and Provo in the Utah State House. Sen. Margaret Dayton represents portions of Utah County.