Did Microsoft Deter Software Innovation?

Abstract

The impact of Microsoft on innovation in the computer software industry was fiercely debated during the recent antitrust case. This paper attempts to address this question through a new database that allows a comprehensive overview of patenting, venture capital financing, sales, and employment in the U.S. software industry between 1990 and 2000. While the conclusions must be necessarily tentative given the crudeness of my measures, I find little evidence consistent with the hypothesis that Microsoft has had a detrimental effect on innovation in the software industry, even after controlling for the possibility that possible that Microsoft targeted areas that also had the greatest potential for innovation and growth.

JEL Classification: L86