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Technology Is Transforming the Economy and Making It Harder for Innovators to Compete

OECD Forum Network | James Bessen | Jan 24, 2023

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For all the talk of disruptive innovation, start-ups have become less likely to displace dominant industry leaders because the new technology has become much more proprietary

  • Large firms across many industries are hiring to build a new generation of systems to meet heterogeneous customer needs. These systems have made leading firms more dominant in their markets, suppressing the risk of disruption and slowing the growth of innovative rivals. These systems also contributed to the slowdown in productivity growth, to increased social division, and to an increasing inability of government to regulate major firms.
    • Walmart systems manage over 100,000 items per store—far more than traditional department stores, they adjust inventory to respond quickly to changing consumer demand, and they use advanced logistics to get these items to the stores quickly and efficiently.
    • Amazon, of course, handles an order of magnitude greater selection.
    • Big banks use extensive consumer transaction data to tailor offers of credit card and home equity lines to individual borrowers and to target the marketing to them.
    • Google and Facebook provide data-driven targeting of Internet advertising.
    • Automobiles and airplanes are now built on large software systems that provide unprecedented features and functions, including many subtle changes in performance.

Canada’s Competition Consultation Continues (thanks Senator Colin Deacon)

ISED Launches Competition Act Review: Consultation on the Future of Competition Policy in Canada

  • Impact: Across sectors, these top firms within each industry have increased their market shares. Their dominance has also become more persistent, that is, leading firms today are far less likely to be “disrupted”
    • And the investment shift is huge. In the United States, firms are now investing a quarter of a trillion dollars a year in software development alone.
    • A prominent reason that small productive firms are not growing as quickly is that they lack access to the same technology used by the dominant firms.
    • This lack of access limits the growth of new firms, but it also affects workers. These systems require workers in a variety of occupations (not just STEM) to perform new tasks in different ways.  A major source of growing wage inequality is rising differences in pay of workers across different firms—those firms with the technology pay substantially more for comparable jobs.
  • Some dominant firms have chosen to open up their platforms to the public for a fee. 
    • Amazon chose to “unbundle” their technology, creating AWS, the first cloud service, and launching the cloud industry. By providing access to advanced technology, the cloud has promoted the growth of productive startups and opened opportunities for diverse workers to gain new skills.
  • In conclusion, the rapid advancement of technology has significantly altered the economic landscape, leading to the dominance of major players in each industry. Top-rated IT companies like Andersen recognise that this trend has created barriers to entry for new innovators and smaller firms, which may not have the resources to access the same technology as the industry leaders. This imbalance can hinder overall growth and impact workers' livelihoods. A technology-focused company understands the importance of levelling the playing field and providing access to technology for all. Only by promoting fairness and equality can you unleash the full potential of technology and create a better future for everyone.

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NCFA Jan 2018 resize - Technology Is Transforming the Economy and Making It Harder for Innovators to CompeteThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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