European competition regulatory bodies are perceived as overly rigid in their approach to evaluating corporate mergers and acquisitions, according to French economist Philippe Aghion. He advocates for a focus on whether such transactions inhibit innovation, particularly green innovation.
Aghion argues that regulatory focus should shift from market share alone to include innovation. He further suggests a more tolerant stance on industrial policy, especially regarding green industrial policy.
Just minutes before being awarded the Nobel Prize in Economics alongside Peter Howitt and economic historian Joel Mokyr, Philippe Aghion participated in a video interview with Nuno Cunha Rodrigues, the president of the Portuguese Competition Authority (AdC), and board member Ana Sofia Rodrigues.
The interview, now accessible, was featured during the VII Lisbon Conference on Competition Law and Economics, taking place today and tomorrow at the Lisbon Congress Center.
During the discussion, Aghion, recognized with Howitt for their work on “the theory of sustained growth through creative destruction,” commented that Europeans lag behind Americans in seizing technological and biotechnological revolutions because “they lacked appropriate institutions to drive innovation.”
“Europe does not have a venture capital financial ecosystem conducive to innovation,” he warns.
Expressing regret over Europe’s absence of an equivalent to the U.S. Defense Advanced Research Projects Agency (DARPA) for fostering innovation, the university professor opines that it remains viable to support pro-competition industrial policy in Europe.
“We can reconcile industrial policy with competition policy. That’s what they do in China and the U.S. They have pro-competition industrial policies, and we need to do the same in Europe,” he states.
For this, a well-designed regulation system is required—though not so extensive as to stifle competition.
“Competition policy in Europe is heavily based on market share. We only look at market share. We don’t analyze whether a merger or acquisition will stifle the entry of future competitors into the market,” he concludes.
Philippe Aghion holds professorships at the Collège de France and INSEAD in Paris and is a visiting professor at the London School of Economics and Political Science (LSE) in London.
He has held notable academic positions at University College London (UCL), the University of Oxford in the UK, MIT, and Harvard University in the U.S.
In France, he was a principal economic advisor to President Emmanuel Macron during his first election.
[Updated at 15:24]
