The Influences of Strategic Management on Antitrust Discourse

• Author: Hillary Greene,Dennis A. Yao
• Published date: 01 December 2014
• DOI: 10.1177/0003603X1405900405
• Date: 01 December 2014
• Subject Matter: Article

THE ANTITRUST BULLETIN:Vol. 59, No. 4/Winter 2014 :789

The influences of strategic

management on antitrust discourse

BYHILLARY GREENE*& DENNIS A. YAO**

This article examines how antitrust law and policy can benefit from

ideas developed in the academic strategy field. Because accurate

assessment and prediction of the effects of firm conduct depend in

part on understanding individual firm capabilities, knowledge from

the strategy field and other business fields complements the

contributions from industrial organization economics (IO). These

business fields also offer theoretical and empirical challenges to the

IO paradigm, which dominates antitrust analysis. The article begins

with a comparison between strategy and IO and then illustrates how

the strategy field can contribute to antitrust merger analysis. The

article then assesses the influence of the strategy field on antitru st

law and scholarship based on a citation analysis, which reveals little

evidence of influence. It concludes with an examination of the likely

impediments to the diffusion of strategy field ideas into antitrust.

KEY WORDS:antitrust, mergers, industrial organization, business strategy,

diffusion of ideas, merger guidelines

© 2014by Federal Legal Publications, Inc.

* Professor of Law, University of Connecticut School of Law, Senior Vis-

iting Scholar, UC Berkeley School of Law and Visiting Scholar, UC Berkeley

College of Engineering (Fung Institute).

** Lawrence E. Fouraker Professor of Business Administration, Harvard

Business School and Visiting Scholar, Haas School, UC Berkeley and UC

Berkeley College of Engineering (Fung Institute). I served as a commissioner

of the Federal Trade Commission from 1991–94.

AUTHORS’NOTE: A preliminary version of this article was presented at the American

Antitrust Institute’s symposium “Antitrust as an Interdisciplinary Field: Insights from

Business Strategy andResearch” (Washington,DC 2013). We thankGreg Gundlachand

an anonymous referee for helpful comments, Lydia Kim for research assistance, and Erin

McDonagh for editorialassistance.The views expressed hereare solely ours.

I. INTRODUCTION

The purpose of antitrust law is to “protect economic freedom and

opportunity by promoting free and fair competition in the market-

place.”1Determining whether a firm has engaged in anticompetitive

conduct depends on whether the activity impairs, or would impair,

the functioning of the marketplace resulting in harm to welfare. Over

time, antitrust law has relied increasingly on teachings from indus-

trial organization economics (IO) to provide theory regarding how

markets work and to provide tools for either measuring or predicting

the competitive effects at issue.

While antitrust has integrated IO into its policy and legal determi-

nations, we argue that antitrust has not sufficiently relied upon com-

parable teachings from the academic business fields despite their

relevance to the actions being scrutinized.2Business fields such as

marketing, operations, organizational behavior, and strategy examine

diverse subjects including the decision making, performance, and

organizational processes of firms. All of these fields contribute to sub-

jects that are critical to making antitrust determinations. In practice,

however, those contributions have arguably received less attention

from the antitrust community than is deserved, in part because the

fields do not prioritize research that seeks to further antitrust goals.

While many contributions from strategy (as well as from other

business fields) complement those of IO, sometimes its contributions

790 :THE AN T IT R US T BULLETIN:Vol. 59, No. 4/Winter 2014

1See U.S. Dep’t of Justice, Antitrust Division, Mission Statement, avail-

able at www.justice.gov/atr/about/mission.

2Dennis A. Yao, C ommi ssioner, Fed eral Trade Co mm’n, Prep ared

Remarks Before the Illinois State Bar Association and Chicago Bar Ass’n (Dec.

2, 1992) (on file with author); Michael E. Porter, Competition an d Antitrust:

Towards a Productivity-Based Approach to Evaluating Mergers and Joint Ventures,

46 ANTITRUST BULL. 919 (2001); Spencer Weber Waller, The Language of Law and

the Language of Business, 52 CASE W. RES. L. REV. 283, 283–84 (2001); Norman

W. Hawker The Public Policy of Antitrust and Strategy: An Overview, 21 J. PUB.

POL’Y& MARKETING 257 (2002); Albert A. Foer, The Third Leg of the Antitrust

Stool: What the Business Schools Have to Offer to Antitrust, 47 N.Y.L. SCH. L. REV.

21, 49 (2003); Thomas B. Leary, The Dialogue Between Students of Business and

Students of Antitrust: A Keynote Address, 47 N.Y.L. SCH. L. REV. 1, 5 (2003); Felix

Oberholzer-Gee & Dennis A. Yao, Antitrust—What Role for Strategic Manage-

ment Expertise?, 90 B.U. L. REV. 1457 (2010).

offer theoretical and empirical challenges to IO and, by extension, to

IO-based antitrust analysis. The divergence between IO and the strat-

egy field reflects, in part, the latter’s heavy reliance on disciplines

other than economics. We believe that the business fields provide

valuable frameworks and insights that would assist in improving

antitrust theory, making key factual determinations, including those

undergirding competitive effects analysis, and predicting the effects

of various proposed antitrust remedies.

This article examines how antitrust law and policy can benefit

from ideas developed in the academic strategy field, which has as its

focus how firms achieve and sustain competitive advantage over their

rivals. While surveying the entire range of business fields and their

respective capacities to contribute to antitrust analysis is beyond the

scope of this article, many of the arguments framed with regard to

strategy would apply to other business fields as well.3

Part II begins with a brief description of strategy scholarship and

how it compares to IO scholarship. In comparing economics, and par-

ticularly IO, to the strategy field, we use mainstream IO as our point of

reference and focus on the first-order differences that characterize each

field. We recognize that research in IO, and for that matter in strategy,

is heterogeneous and that exceptions to our characterization are

inevitable. Part III illustrates how strategy insights can prove valuable

in the context of antitrust merger review. Part IV offers some prelimi-

nary evidence concerning the direct influence of strategy on antitrust

law and scholarship. The statistics show that the influence of strategy

is quite limited, though some weak evidence suggests that strategy’s

influence may be increasing. Part V assesses how ideas from the strat-

egy field can influence antitrust law and suggests which types of ideas

and analyses are more likely to be adopted. Part VI concludes.

II. THE STRATEGY FIELD AND ITS RELATIONSHIP TO

ANTITRUST

Part II describes the focus of the strategy field and summarizes its

relationship to IO with a particular emphasis upon key differences

ST R AT E G Y FI E L D ’SIN F L U E N C E :791

3See Gregory T. Gundlach, Joan M. Phillips & Debra M. Desrochers,

Antitrust and Marketing: A Primer and Call to Research, 21 J. PUB. POL’Y& MAR-

KETING 232 (2002).