Christine Wilson (Commissioner, US Federal Trade Commission) started by pointing out two strains of the argument that the acquisition of nascent competitors reduced competition ; it is believed, first, that small players are inherently more innovative than large ones and, second, that less concentrated industries are less innovative than more concentrated ones. She traced these arguments back to the work of Arrow and contrasted it with the work of Schumpeter, who championed the opposing view that monopolists create more innovation.
Commissioner Wilson stressed that Arrow and Schumpeter’s arguments have been overly simplified, as some have glossed over related assumptions, limitations, and qualifications ; she thus referred to the modern adaptation of Arrow’s work by Columbia Professor Tim Wu, US Senator Elizabeth Warren, and others as the “Arrovian legend”. This legend is of significant practical importance ; if we actually believe that start-ups and less concentrated industries are more innovative, then many acquisitions in the digital sector should be blocked. However, Commissioner Wilson emphasized that economists cannot find a simple relationship between innovation and market structure. Studies reveal that innovation is sometimes maximized by monopoly, other times by oligopoly, and yet other times by perfect competition. They also suggest that this relationship can be better assessed if other variables are considered, including innovation-level factors, industry-level factors and firm-level factors.