Working Paper: CEPR ID: DP17635
Authors: Martin Watzinger; Monika Schnitzer
Abstract: We analyze the effects of the 1984 breakup of the Bell System on the rate, diversity, and direction of US innovation. In the antitrust case leading to the breakup, AT&T, the holding company of the Bell System, was accused of using exclusionary practices against competitors. The breakup was intended to end these practices. After the breakup, the scale and diversity of telecommunications innovation increased. Total patenting by US inventors related to telecommunications increased by 19%, driven by companies unrelated to the Bell System. Patenting by Bell’s successor companies decreased, but not the number of top inventions
Keywords: antitrust; innovation; diversity; exclusionary practices
JEL Codes: O30; K21; L40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Breakup of the Bell System (L96) | Increased patenting rates (O34) |
| Breakup of the Bell System (L96) | Increased R&D spending in telecommunications (L96) |
| Breakup of the Bell System (L96) | Diversified types of innovations in telecommunications (L96) |
| Breakup of the Bell System (L96) | Decrease in patenting by Bell's successor companies (L96) |