The dynamic competition paradigm provides policy-relevant insights into digital disruption and the assessment of monopoly power. It does so by harnessing the firm-level analytics of the dynamic capabilities framework, which has been developed over the past thirty years in the field of strategic management. Current competition policy is heavy on static demand-side factors and models. The capabilities perspective adds the missing, dynamic supply side, including the concept of innovation capability, which is critical for understanding potential competition. "Big Tech" firms are major investors in innovation, and their R&D activities are analyzed in detail. This Element also analyzes the nature of digital competition generally. Innovative platform firms with strong dynamic capabilities can sometimes achieve dominance almost by default, because their competitors have weaker capabilities. But dominance can also be transitory, lasting only until the disruption of the next innovation cycle. This title is also available as Open Access on Cambridge Core.
