Archive for September, 2010

Tom Lenard on five Q’s on tech

Tuesday, September 28th, 2010

Last week, Rob Haralson did a quick interview with TPI’s Tom Lenard for his site five Q’s on tech.

Tom discusses why he thinks policymakers looking at privacy issues are going about it all wrong, network neutrality, and upcoming TPI projects.

Video is here:

Five Q’s with Tom Lenard, Tech Policy Institute from on Vimeo.

Antitrust and High-Tech: The Do-Not-Cold-Call List

Friday, September 24th, 2010

It has been the practice of some prominent Silicon Valley companies (and perhaps other companies as well) to refrain from “cold calling” employees of companies with whom they collaborate.  This seems like it could be a reasonable practice since companies may be less willing to enter into beneficial collaborations if they think their best employees can easily be stolen away.  In any event, the companies never agreed to refrain from talking to employees who expressed some interest in changing jobs (that would not be a cold call) or to refrain from hiring any of their collaborators’ employees, so the effect of these cold-call agreements was likely small.

Nevertheless, the Antitrust Division of the Department of Justice opened an investigation because it was concerned that the do-not-cold-call agreements were anticompetitive and had the effect of depressing wages.  That investigation is now complete and six major companies—Adobe, Apple, Google, Intel, Intuit, and Pixar—have settled with the DOJ and essentially agreed not to  enter into do-not-cold-call agreements for a period of five years.

We don’t know whether this is a good or bad settlement, but neither does the Division, because it didn’t look at the economic consequences of the do-not-cold-call agreements or of the settlement on wages or on competition.  Instead of looking at the evidence, which the Division would have done had it evaluated the case under a “rule of reason,” the Division viewed these agreements are per se violations of the antitrust laws.

These agreements could be anti-competitive, but they may also could be pro-competitive, for at least two reasons:  They remove a potential impediment to pro-competitive collaborations between companies.  They may also serve as some balance to California’s weak do-not-compete legal regime.  (Strong do-not-compete employment provisions are not enforceable in California).

The Division should have viewed this as a “rule of reason” case and evaluated both the potential pro- and anti-competitive effects of do-not-cold-call agreements.  Expanding the scope of per se antitrust violations in the absence of analysis can interfere with productive collaboration, efficient employment practices, and, ultimately, innovation in these critically important high-tech industries.

Research Roundup: Small Businesses and Net Employment Growth, and more

Friday, September 17th, 2010

In Washington, pretty much everyone agrees that private sector job growth comes mostly from small businesses.  Every president since Ronald Reagan has echoed this proposition in a major speech, supported by literature showing an inverse relationship between job growth and firm size dating back to 1979.  However, according to Haltiwanger, Jarmin, and Miranda, this popular maxim of economic policy just isn’t true.  The authors employ a novel dataset from the Census Bureau to find that when controlling for firm age there is “no systematic relationship between net growth rates and firm size.”  For the visual learners among us, the adjustment looks like this:

Haltiwanger, Jarmin, & Miranda (2010) p 39

Source: Haltiwanger, Jarmin, & Miranda (2010) p. 39

The pink and green lines plot results that might be expected from popular wisdom, while the red and blue lines are gleaned from regressions incorporating a variable for firm age.  The results differ based on whether firms are classed by their size in a base year or by the current-year average (we’ll spare you the full methodology but note that the authors prefer the latter). Under either classification the famed inverse relationship is upended upon factoring in age.

As TPI’s Scott Wallsten points out in a recent commentary, measurement difficulties confound economic analysis of high tech markets.  Haltiwanger, Jarmin, and Miranda show that even metrics as banal as firm age can cast orthodox understandings across all business sectors into doubt when better data become available.

(Click through to the full post to see the abstract and link for this paper and over 30 others on green tech, the developing world, cyber security, and more.) (more…)