| Willy Brandt School of Public Policy

“Rulers of their own governments” – the evolution of big tech firms

On June 22, 2022, Dr. Cecilia Rikap, permanent lecturer in International Political Economy (IPE) at City, University of London joined the University of Erfurt for her lecture “The co-evolution of corporate and political power under intellectual monopoly capitalism: Exploring the interplay between Big Tech, the US and the Chinese states.”

Dr. Cecilia Rikap
Dr. Cecilia Rikap

Rikap’s talk opened with an introduction to the new political economy of science and technology, pointing out that profits are increasingly concentrated by lead firms like Google, Amazon, Microsoft and more. These firms are able to concentrate value because they are constantly winning the innovation race, giving them what Rikap and other authors have called ‘intellectual monopolies’. Not only do these firms perform in-house research and development (R&D), but their position as organizers of corporate innovation systems allows them to appropriate knowledge and value from subordinate firms. The gap between key intellectual monopolies and other firms is widening, because IMs have an advantage when it comes to their higher degree of absorptive capacity.

These firms, Rikap argues, are able to organize corporate innovation systems to their advantage – partly because of the way in which they use data and artificial intelligence (AI). AI is a method of innovation because it can constantly learn and improve; and companies use it to organize their systems of production to maximize profits. As Jack Ma, chair of China’s Alibaba group, describes it, 

“Big Data will make the market smarter and make it possible to plan and predict market forces so as to allow us to finally achieve a planned economy”.

Subordinate actors that are within the Corporate Innovation system won’t necessarily profit. As Rikap shows in her network analysis of citations and tech conferences, knowledge is co-produced by different actors especially academic institutions, but patents (and their profits) belong to lead intellectual monopolies. Because invention and follow-up innovations are what drives economic growth, the concentration of intangible assets like data and knowledge in the hands of IMs could lead to economic slowdowns. This also has implications for North-South divides as the knowledge produced in peripheral countries ends up being patented by companies based in the US and China. However that also does not mean that citizens in the US or China will see economic benefits from IMs operating in their countries because IMs can easily ‘offshore’ their accounting to different locations by, for example, registering in Ireland (which does not follow EU General Data Protection laws). Europe may be a ‘loser’ of the era of intellectual monopolies, as it lacks its own big tech firms; and lead firms like Siemens don’t do much of their own R&D, instead using cloud services of IMs to process their data, becoming a source of further digital intelligence to companies like Amazon.

The relationship of intellectual monopolies to their states in some spheres underpins their power – but it may also undermine the state. Here, Rikap focuses on the US and China as champions of big tech who have also become influenced by their lobbying. China enabled the rise of its IMs through policies like ‘the great firewall’, as well as other projects like the Belt and Road Initiative which give home companies an advantage in the region. The US, as one of the key architects of the global intellectual property regime, has focused on protecting its own companies and uses the narrative of Chinese tech as a threat to American dominance. Increasingly, however, key US companies are coming to influence US policy in many spheres: for example, the US National Security Commission on AI is led by tech giant managers, who provide advice to congress on AI and national defense.

So what can be done to regulate IMs? Rikap points out that so far, Europe is one of the only locations where attempts have been made to challenge big tech using the Digital Markets Act. However, these still fall short because these acts don’t understand data as relational – what matters is rather data centralization and analysis, and not whether a person has clicked ‘don’t agree’ on many different websites. What should be done, she suggests, is to focus on feasible solutions: although suggestions like making a common knowledge regime might be attractive, these are utopian given what we know about the logics of IM. An easier possibility could be to waive intellectual property rights for knowledge that can help alleviate key hardships (like the COVID vaccine). Another key point is the importance of taxing IMs digital databases, as these are an important source of digital knowledge. For listeners to the lecture, a key takeaway was the need to revisit the assumptions about economics and innovation systems, which are rapidly changing in the age of intellectual monopolies.