Competing in the Age of AI: Firm Capabilities and Antitrust Considerations

In the 1960s, Nobel Laureate Herbert Simon posited that intelligent systems exhibit their intelligence by achieving their objectives in the face of diverse and evolving circumstances, within certain physiological or computational limits. He argued that both human organizations and computer systems are inherently “artificial” in that they dynamically update in response to changing environments.1 Artificial Intelligence (AI) is a fundamental enabling technology that has captured the imagination for over half a century and is now becoming a tangible reality. It stands out both quantitatively and qualitatively from other technologies due to its capacity to assimilate tacit knowledge and rival human intelligence. AI’s human-like adaptability makes it an incredibly powerful tool for a variety of applications, promising not only to automate routine tasks, but to revolutionize how businesses operate and compete. This chapter reviews AI’s role as an enabling technology, exploring its impact on organizational capabilities and strategic management. Lastly, it examines some potential issues in competition policy.