Competing, countervailing, and coalescing forces: the economics of intra- and inter-business system competition.

I. INTRODUCTION

The recent work on complexity science, business ecosystems, and networks offers fresh insights into how modern business systems operate, compete, and evolve. In particular, the new literature has focused the spotlight on those businesses that represent critical catalysts in the development, even creation, of markets. Such businesses, labeled as "hubs," "stewards," or "keystone companies," play central roles in business systems, exerting their influence and power not only on those that they directly trade with, but also on those other players in the system on whose existence they depend, like complementary product providers, as well as competitors. (1) Indeed, a key characteristic of a modern business system is the extensive interdependence of the numerous participants that typically make up a system, with service and product markets often intertwined by extensive multimarket contact and competition. In such circumstances, it seems appropriate that antitrust analysis should take a broader perspective than merely looking at market power in the context of separate individual markets.

While there may be an emphasis on a single, key business and its central role in a business system, the nature of interdependency may well mean that a number of influential and powerful organizations may jointly hold key roles in determining outcomes not only within a business system but also across different business systems. Consequently, it is quite conceivable that more than one party in a business system--where complementary and competing firms interact to produce a good or set of goods--may potentially hold market power. This then raises antitrust issues, which hark back to old economic debates about what happens when positions of market power lie side by side or face to face in a broad industry or sector of the economy. Do such multiple occurrences of market power tend to alleviate or exaggerate market failure problems? Similarly, do they countervail one another to the public good or coalesce to protect incumbent positions to the public detriment?

Drawing on the insights from the work on business ecosystems and networks, but viewed through the more traditional lens of competition economics, this article considers these questions with a view to providing an antitrust perspective on developments within and across business systems. In particular, the article shows that the market failure problems that may be associated with business system competition have a long and established pedigree in economic theory. Utilizing this body of economic learning, the article begins by considering intra-system competition, examining the implications of multiple instances of market power arising in the same business system. The section that follows considers inter-system competition, looking at what happens when one hub-led business system meets another. The final section provides some concluding remarks.

II. INTRA-SYSTEM COMPETITION